Banks seem to be taking away all the cream when it comes to earning commissions from sale of mutual funds, as there are as many as seven banks among the top-ten mutual fund distributors in terms of commissions paid to them.
As per the latest disclosure of commission and expenses paid by various fund houses to their distributors, HSBC, HDFC Bank and Citibank top the chart for the last fiscal ended March 31, 2012.
Besides, there are four other banks among the top-ten commission earners -Standard Chartered Bank, Axis Bank, ICICI Bank and Kotak Mahindra Bank. According to the distribution commission disclosure made by the industry body AMFI (Association of Mutual Funds in India), there were seven banks among the top-ten distributors on this parameter in the previous fiscal 2010-11 as well.
Besides, all these seven banks recorded an increase in the payments paid to them by the fund houses for distribution of mutual fund products, even as the industry had been raising concerns till recently about their businesses being hurt by the regulations regarding lack of sufficient incentives for sale of mutual fund products.
There has been only one change among these seven banks with ICICI Bank replacing public sector giant SBI in the top-ten.
SBI is the only major bank to have witnessed a decline in the mutual fund distribution payments made to it during the last fiscal, pushing it out of the top ten.
AMFI has listed out a total of 269 mutual fund distributors, who were collectively paid about Rs 1,860 crore during 2011-12 towards commission and expenses towards sale of MF products. These distributors recorded an increase of about Rs 163 crore in such payments from Rs 1,697 crore in the previous fiscal 2010-11.
The list for 2011-12 only includes those distributors who are operating from more than 20 locations. As per AMFI data, a total of 403 distributors were paid a total commission of Rs 1,773 crore in the fiscal 2010-11, but many of them have not been named in the list for 2011-12.
The seven banks, which are part of the top-ten, were together paid Rs 662 crore, accounting for more than one-third of the commission paid to all the distributors during 2011-12. Besides these seven, other banks which figured high on the list for 2011-12 included Deutsche Bank, Royal Bank of Scotland, State Bank of India, BNP Paribas, ING Vysya Bank, Indusind Bank, IDBI Bank, DBS Bank, Canara Bank, Union Bank of India, Barclays Bank, Yes Bank, Bank of India, Punjab National Bank, Bank Of Baroda, State Bank of Patiala and Development Credit Bank.
About 25 banks were collectively paid about Rs 870 crore, accounting for nearly half of the total commission payments made by the fund houses during 2011-12 to all the distributors put together. The non-bank distributors that figured among the top-ten in the last fiscal included NJ IndiaInvest, JM Financial and ICICI Securities Ltd.
Other such major distributors were DSP Merrill Lynch, Bajaj Capital, SPA Capital, Aditya Birla Money Mart, Karvy Stock Broking, Prudent Corporate Advisory Services, IIFL Wealth Management, Anand Rathi Financial Services, ENAM Securities, Pioneer Client Associates, RR Investors Capital Services, Wealth Advisors (India), Bluechip Corporate Investment Centre, Barclays Securities (India) and Credit Suisse Securities India.
Among the top-ten, only JM Financial saw its payments decline during 2011-12, while Citibank, HSBC, ICICI Bank, Axis Bank and HDFC Bank topped the list in terms of increase in their payments. In the previous fiscal 2010-11, the highest commission was paid to HSBC, followed by HDFC Bank, NJ IndiaInvest, Citibank, Standard Chartered Bank, JM Financial Services, Kotak Mahindra Bank, Axis Bank, Bajaj Capital and SBI in the top ten.
The seven banks, which figured among the top ten in 2010-11, accounted for about 29 percent of total commission in that year, which rose to nearly 35 percent in 2011-12.
In the year 2010-11, a total of about 30 banks were paid a total amount of about Rs 690 crore, accounting for close to 34 percent of cumulative commission paid by the fund houses that year, indicating a significant rise in the share of banks in the mutual fund commissions in the last fiscal.