Mumbai: Deutsche Bank launched its retail operations in India in October 2005 to cash in on the growing consumer spend. Around the same time, it also entered the retail market in China by acquiring stake in a local bank. In a sense, it was Deutsche’s re-entry into the Indian retail space. Till 1999, it ran a dedicated branch in Mumbai to deal with individual consumers. In the past one and a half years, the German Bank has acquired 350,000 accounts including 250,000 credit card holders. In an exclusive interview with Mint, Gunit Chadha, managing director and CEO of Deutsche Bank India, talks about the bank’s overall game plan and why it is not intimidated by competition despite being a late entrant into the retail space. Edited excerpts:
How is your retail business doing?
Let’s look at the background first. We entered the retail segment when the consumer play in India was becoming very attractive. The second factor was the fact that our corporate and investment banking experience in India proved to be very rewarding. We had amplified our presence in India by adding on equity broking business, capital market business, and merger and acquisition advisory, apart from having a strong global markets presence and dominant transaction banking presence. So, it went well with the first trend. Thirdly, Deutsche group saw a large opportunity in wealth management in India as the wallet was considerably large compared with other Asian peers. We decided to make the most of the opportunity.
So we expanded the private wealth management that we already had, and took it to the mass affluent. It has been a rewarding experience since and we are even more committed to retail operations.
After Deutsche, UK’s Barclays Bank also has entered the retail segment. How easy is it to make money in this market?
We are not focused on competition; we are focused on market opportunities. We are trying to build a sustainable proposition around this opportunity. One part of this is getting market access. Our branch network has risen from eight to 10. We are looking at more tier II cities and getting more inclusive and embedded into India.
Then again, there is the consumer finance business that is growing well. Deutsche Bank is a very strong bank when it comes to origination, structuring and securitizing consumer surplus flows. And, finally, there is the credit card franchise. We have just crossed 250,000 credit cards in India and hopefully we will be launching co-branded products as well.
Do you have plans to get into mortgages and auto loans?
Stage one of our retail, which happened 20 months ago, was to build our branch banking network through which we were offering investment advisory and structured products. In stage two, exactly a year down the line, we launched credit cards. In stage three, we should start evaluating small and medium enterprises. As far as consumer finance is concerned, it depends on market access. To sell consumer finance through only our branches is not the only proposition. As a firm, we believe in open architecture and we would not hesitate to sell-third party products or use third-party services.
You are a late entrant into retail. Doesn’t the competition faze you? There are already several well-established players in this segment.
We have to respect incumbency but we don’t have to fear it. The market opportunity is large enough and if you innovate there’s place for all. And we have seen that being delivered on our other business fronts. For instance, we did not have a investment bank three years ago; today we are one of the best there (is). We entered “late” in equity broking but we are already the third largest equity broking house. So, be it investment banking, broking, asset management, the registrar and transfer agency business ... we launched each of these businesses and have made our presence felt in every segment. We are confident that we can get market leadership quickly. In retail, we are challenged by market access.
So your focus will still remain on corporate and investment banking with retail being a frill.
No, retail is no frill. It’s (the) core but today we are predominantly a corporate and investment bank. Bulk of our business is built around corporate and investment banking. Our business has four parts—the first part is the global market fixed income platform which does debt, capital markets, foreign exchange, derivatives, structured financing, distressed assets and credit ratings. All these products connect Indian issuers to our global network.
The second part is equity sales and trading, where we have already gained the third largest position here starting from scratch.
The third part is commercial banking where Deutsche Bank in India is one of the largest corporate and transaction banks. We are the largest custodian in the country with a dominant share of assets under custody from foreign institutional investors, mutual funds and insurance companies. We are also the dominant depository bank when Indians do issuances abroad.
The fourth part is our investment banking business which we started from scratch in 2004. We focus not only on overseas issuances but domestic issuances as well. For instance, we advised Tata Steel Ltd on the takeover of Corus Group Plc.
Around this successful business model, we are now building long-term business such as retail, private wealth management and asset management.
How big is your asset management and wealth management business?
Our wealth management is absolutely (at the) top end of the market. It’s a very strong business and is growing at 40-50% per annum. But more importantly, we are able to take care of the whole gamut of financial needs of the entrepreneur. We recently crossed Rs10,000 crore in assets under management. That’s not bad considering the fact that we launched the business only four years ago. To complement our institutional focus, Deutsche Asset Management has launched the market-leading European retail brand DWS in India and is rapidly adding retail customers.
You spoke about access. Do you have any plans to float a non-banking financial arm which could help distribute your offerings, too?
Yes, we have applied for (permission to start) one and we are awaiting regulatory approval. An NBFC has the potential to be a strong vehicle in our structured finance and consumer finance.
Other foreign banks are looking around for acquistions but you seem to be averse to the idea.
We find organic growth compelling enough and thus we did not seek those opportunities.
How committed are you to India?
Four years ago, the Deutsche Bank Group had less than 500 people. Today, we are over 5,000. Our capital has gone up from Rs500 crore to Rs2,500 crore. We would seriously consider bringing in more, even in the short term in line with the growth in our business momentum. In Septemeber 2006, the bank held its global senior managment conference in India, the first instance of the conference being held outside Europe and the Americas. We have recently included Mumbai in our Urban Age project, a worldwide investigation into the future of cities.
What’s your market share among foreign banks in India?
It depends on which market segment you are talking about. In investment banking, our market share is in double digits; in the debt capital markets our market share is between 28% and 30%; in equity broking business we are in high single digits. Retail is a new foray for us and we have high ambitions there.
Attrition would seem to be a problem in the banking sector and Deutsche Bank has been hit especially hard in recent times with several people leaving it.
That’s not true. Today, growth creates employability; talent does not need career planning but a growth platform to leverage the skill. My aim is to translate our vision on the ground by creating growth as the mantra of employee motivation.