Bank sponsored AMCs leverage affiliates to tap customers

An analysis of the commission figures released by fund houses shows that bank sponsored AMCs continued to leverage their affiliates/sponsors to tap customers in FY 15-16.

There are 12 fund houses which have bank sponsors.

Among the bank sponsored AMCs, ICICI Pru paid the highest gross commission of Rs. 103 crore to its sponsor ICICI Bank. In addition, it paid Rs. 18 crore to ICICI Securities.  

Similarly, Axis Bank paid gross commission of Rs. 93 crore to Axis Bank and Axis Capital last fiscal. Axis Bank was the largest distributor of Axis AMC, which helped it channelize Rs. 3,065 crore net inflows in FY15-16. While Axis Bank continues to be the largest distributor of Axis MF, the fund house has a more broad based distribution network comprising IFAs and NDs now. For instance, Surat based NJ India helped the fund house get net inflows of Rs. 549 crore last fiscal.

Bank sponsored AMCs

HSBC MF’s FY15-16 commission disclosure was not available on its website. We looked at the FY14-15 figures and found that HSBC Bank was the largest distributor of HSBC MF. The fund house paid Rs. 16 crore to HSBC Bank. The bank channelized Rs. 44 crore for HSBC MF last fiscal. HSBC Bank was managing AUA of Rs. 3,945 crore last fiscal for HSBC MF which was 54% of HSBC MF’s AUM (Rs. 7,274 crore) as on March 2016.

While private sector bank sponsored AMCs have been able to leverage their sponsor’s branch network to grow their business, most of their public sector peers still have a long way to go. This is because PSU banks are not as active as their private sector peers in selling mutual funds as a category. 

However, experts believe that PSU banks do have the potential to give private sector players a run for their money if they leverage their wide branch network. The reach of PSU banks is wider as compared to their private sector peers. For instance, Bank of Baroda has 5,351 branches while HDFC Bank has 4,520 branches as on March 2016. (Source: Bank Websites). “PSU banks have a good customer base and they can easily tap these customers. They are now building this expertise. Also, PSU banks can help the industry penetrate in B15 cities, says a Mumbai based distributor.

PSU banks are catching up to the trend. For instance, SBI Bank has set up its separate wealth management team called SBI Exclusif in January this year to sell third party products.

“We get 12% of our AUM through our associate banks. Apart from bank, we have built up an extensive distribution network,” says Dinesh Khara, MD & CEO, SBI MF. When asked how SBI MF will tap its branch network to grow its AUM, Khara said “There are some SBI Bank branches which sell mutual funds. It is up the banks to decide if they want to be aggressive in selling third party products.”

All in all, the sponsors/associates managed AUA of Rs. 70,450 crore and received gross commission of Rs. 480 crore last fiscal.

Among the non-banking affiliates, we looked at the contribution received by 13 AMCs from their sponsors/associates. Of the 13 AMCs, only four of them received a significant contribution from sponsor and associate firms.   

Non-banking affiliate contribution

* Invesco Hong Kong Ltd. acquired remaining 51% stake in the AMC on April 7, 2016, the aforesaid entities ceased to be sponsor/ associate of the Invesco Mutual Fund (earlier known as Religare Invesco Mutual Fund) w.e.f. April 7, 2016.