Mumbai: A decade after selling its India business to Standard Chartered Plc, Australia and New Zealand Banking Group Ltd or ANZ Bank is set to return as it finds the fast-growing economy too good a business opportunity to miss out on. Mark Robinson, chief executive officer for South and South East Asia at ANZ Bank, spoke in an interview about the lender’s business plans. Robinson was overseeing Citibank’s operations in India, Sri Lanka, Bangladesh and Nepal until recently. Edited excerpts:
What made you return to India?
India is an extremely attractive market for financial services, not just banking but insurance and wealth management. They are growing with the growth in wealth in all income levels. The increasing connectivity that India has with the rest of the world makes our proposition much more attractive to customers in India who may be trading with other countries and also individuals. A super regional bank like us needs to be in India, it’s a strategic imperative.
So, it’s an irresistible market.
If you are an international financial institution, you must have a presence in India. The shape of it, the extent of it, is a secondary question. If you are in the top 15 economies of the world, you have to be in India.
In that case, why did you leave the country?
That was a strategic decision made at the time. ANZ was different then and India was different. Clearly, with our leadership and strategy and the presence we have in Asia, it makes perfect sense for us to do what we are doing in India.
What are your plans here?
Within a couple of months, we will open a branch. We got the in-principle approval (from the Reserve Bank of India) in April last year. In November, we got the final approval, and we are on track to open that in the time frame that we have committed.
That will be a full service branch offering local banking services to Indian corporations and international companies operating here and companies around the region. We have been providing finance to some Indian customers for a number of years through offshore, but now we are able to go back to them not only with trade finance and syndication loans but also local banking services like forex, cash management and account services. We would hope that we can expand our business with people who know us and also acquire new customers.
Will you focus on retail also?
It will be wholesale. The focus right now is on opening the branch and deepening our presence in the institutional market. Later we can look at expanding it. So the branch network will be limited.
How important is India-Australia trade for your plans here?
India is Australia’s third-largest trading partner and the fastest growing one. Australia is rich in natural resources and India needs to import natural resources to meet the demands of modernizing the economy. So there is a natural trade flow which we would like to facilitate. We already have customers at both ends. We have strengths in natural resources, agri business and infrastructure. We will look at trade, debt capital markets, commodities and foreign exchange. We are a big player in commodities. It will be unrealistic to say we are going to do everything in India tomorrow. We will focus on our strengths and product groups where we think we have an advantage. We have about 100 customers.
Any lessons from your presence here in the past?
For a start, we have a number of people working for the institution who had worked at Grindlays. There are also people who have spent considerable parts of their career in India, including myself. So there is already familiarity in the institution as people we can call on and potentially consider assignments in India.
ANZ targets 30% of profit from Asia. How much of that will come from India?
The goal that we set is to have 30% business outside of Australia and New Zealand in five years—there is no question that India is going to be very important for us in achieving that. I can’t give exact percentages but India will be important to achieve the goal.
Your margins were squeezed in the home market last quarter.
One major lesson in banking in the last several years is the virtue of diversification. The first diversification is that the breakdown of interest earnings and non-interest earnings is balanced. Having a diversification of customers by industry, products and geography, over time, will improve the quality of our revenue. It will also lower our dependence on margins in any one country. So we are not dependent on which way the margins will go in Australia. Over time, when we reach 30% of business from outside Australia and New Zealand, that will give us high quality revenue. Currently, 70% of business comes from Australia, 16% from New Zealand and 14% from Asia-Pacific region. Singapore, Indonesia, Taiwan are big markets for us now.
Going forward, China, Greater Mekong, including Vietnam, Cambodia and Laos, Indonesia and India will be the four legs of the chair that will be responsible for a large portion of our growth.
Isn’t that too much to ask with only one branch in India?
This is a five-year plan; hopefully, we will have a deeper and broader presence by then. In our home market, we are a high-street bank and also present in small towns. We are comfortable with the model of a broad distribution network. In India, we will start off with institutional business, but how we will deepen that will depend on the regulatory environment and attractiveness of the business model.
Would you prefer the subsidiary route?
In the case of India, the subsidiarization is being accompanied with a plan for an international bank and an Indian bank to have a level-playing field. If this is an attractive proposition to be a subsidiary, we will have to look at it from that perspective.
Any targets for India in terms of revenue?
We want to grow fast, faster than other business; and in four-five years from now we want to have a significantly high share of our international business.
Will profits be ploughed back?
Absolutely. As long as the business continues to grow, I can imagine a bulk of our profits will be reinvested in the business here.
Some private banks in India may be up for sale. Does it entice you?
In order to be able to look at something like that, we need to have a very healthy organic business and a very experienced group of people. My experience is an acquisition like that to enter a market is very problematic. When you are in a market, and you have a very experienced pool of people and you have customer relationships, you should be in a position to look at such things.
You have an existing ANZ advisory business.
That company will essentially fade out. All people employed there, approximately 60, are now employed in the branch. No activities will continue there because those will be conducted inside the branch once it is opened.
You also have a back office in Bangalore.
We have about 4,700 people working in Bangalore. That’s for operations and technology. We will use Bangalore for a substantive part of our back office as we grow here.