Last year, around this time, Corporation Bank shares were trading around Rs 700 while Bank of Baroda (BoB) was above Rs 1,000. One year down the line, when BoB is around Rs 700, Corporation Bank has slipped below Rs 400.
While these two lenders are not exactly comparable (Bank of Baroda is of much bigger size and reach) the challenge that confronts Corporation Bank is quite clear, and it is not surprising, in this context, that Corporation Bank has snapped up Ajai Kumar as its new chairman and managing director.
Ironically, the bank of Baroda-Corporation Bank nexus in this story gets more intricate. Kumar started his career in Bank of Baroda in 1973 and oversaw the bank’s migration to core banking. He now has the task of upgrading Corporation Bank’s information technology, which is surprising considering that the bank was one of the first to introduce technology in public sector banking. The need for technology upgradation is more urgent now because Kumar wants to make its presence felt across the country by opening more than 200 branches every month. To service the large number of customers, the un-branded technology platform, which is still used by the bank, may not be sufficient.
Kumar, a physics post graduate from Allahabad University, has other challenges. He has to reshuffle the composition of the liabilities of the bank since it is sitting over a large amount of high cost deposits. The bank’s share of current and savings account deposit to total deposit is lower than industry average. Kumar’s main aim will be to increase that share which in turn will help margins. Kumar, who played a significant role in Bank of Baroda’s retail expansion, may find his experience useful this time around. Kumar, who was an executive director at UCO Bank will also have to address the huge number of mid-management personnel slated to retire next year.
