Mumbai: A decade ago, Jaspal Bindra, the then chief executive officer and general manager of Standard Chartered Bank in India, successfully led the acquisition of ANZ Grindlays to make StanChart the largest international bank in India.
India accounts for about 25% of the bank’s employee strength, 12% of revenue and at least 20% of net profit, and the pie can grow only bigger.
Bindra, now Standard Chartered Plc’s Asia operations head and part of the five-member board that runs the bank, says the bank has merely scratched the surface of enormous opportunities that the world’s second fastest growing major economy offers.
Charting new plans: Bindra says the IDR issue will make the bank more accountable to clients and investors, giving relations with them a new dimension. Abhijit Bhatlekar/Mint
In an interview, Bindra, group executive director, discusses life after India depository receipts (IDR) issue for StanChart in India. Edited excerpts:
After the acquisition of ANZ Grindlays’ India business, IDR is yet another milestone for the bank. What next?
The issue is not about milestones. It’s about how many opportunities have come our way. You have mentioned the two major opportunities. But we also acquired UTI Securities, the American Express banking business, SMBC (Sumitomo Mitsui Banking Corporation)… We were the first among foreign banks to set up our operational hub in India, Scope. It’s a very big milestone for us. Now every other foreign company is doing it, but we had done it in 1997-98.
It’s really a question of what opportunity comes our way. We hope more doors will open.
Despite all these acquisitions, you are still the second largest foreign bank in India, after Citibank, by assets. Don’t you aspire to be the leader?
There are so many ways of cutting the matrix... We always felt that being (the) best is better than being big.
So, you are the best?
If you look at our efficiency ratios and our overall performance, you would think so. In India, we have quite a strong focus on growth in assets, but I would rather be more profitable than big in assets.
Globally, we are much smaller in size than many other institutions, but I think we have given evidence to the world that we are about being the best and not about being big. We are the only company of any size in banking, internationally, that has seven years of record income and profit at a stretch through the two crises. I don’t think any banking institution can boast of that.
The more noticeable feature that involves our investors and stakeholders is that our share price in 2010 is at the same level where it was before the 2008 crisis. The other companies in (the) banking industry are anywhere between 30% and 85% lower than what their prices were before the crisis.
IDR is one way of demonstrating your commitment to India. The other way could be local incorporation.
We never had a closed mind to the subsidiary route. In fact, we operate as a subsidiary in many countries. The only reason why we have not converted our India operations into a subsidiary is because there is no real benefit of being a subsidiary so far. If there is some level of incentivization to be a subsidiary, of course we will do it.
What kind of incentives will help you make up your mind?
We would like as much of a level playing field with a local banks as we could get.
Won’t you get a level playing field once you become a subsidiary?
So far that’s not the case. Today if I become a subsidiary, I don’t get many branches, etc. There is no provision in the regulations that gives me anything more today than what I have without being a subsidiary. If there is any incentivization, obviously we will be interested. We do not have a closed mind but really there is no reason to become a subsidiary. There is nothing that we cannot do today which we can do when we become a subsidiary.
You have 94 branches, the highest among foreign banks. What is the ideal branch network? Five hundred? One thousand?
It will be in hundreds. We are not looking at thousands. The exact number is difficult to project because it is a changing field. As new opportunities unfold and tier III and tier IV cities come up, we need more footprints. But between the tier I and tier II cities, we need hundreds of branches.
Will the IDR give you special advantages over competition?
It’s not right for us to presume that we will get any special treatment from the regulator among foreign banks as the regulations are meant for everyone. But we do believe that when the new norms (on foreign banks in India) come, we will be in a much better position to leverage and act on that than some of the other banks that don’t have our kind of presence.
Given a choice, will you acquire a local bank?
Oh, absolutely. Every acquisition opportunity that has come in the market we have taken.
You did apply for local banks when they were up for sale but you didn’t get any...
It’s not like that. They considered some local players and gave them preference, which is fine. We did not make it.
Any change in StanChart’s life after the IDR?
Oh, yes. It’s a huge step forward. It puts us in a very different perspective with our clients and our investors in India. Our level of disclosures and conversations with them will go to a new height. For instance, the only thing that we speak with mutual funds so far is about distributing their products, but now we will explain to them all our activities. We will tell them about our strategic intent. We will find ourselves accountable to them.
The intensity of relationships with some of our client groups—some high networth individuals and institutional investors—will take a new dimension.
The employees will be able to participate in stock options, which they could not earlier.
Finally, the profile takes a different meaning. Once you are quoted on the stock exchange, you will be in the news for good or bad (reasons). If we do something in Africa, it will make big news in India as it will affect our share price. Our level of responsibility will go up.
Have your corporate clients invested in the IDRs?
Did you tell them to do that?
Well, whoever asked us, we said yes.
What do Indian consumers get from you that they do not get from local banks?
I think this question is better posed to the customers than to the bank. I can’t say how we are different from others but the fact that we have a reasonable income and reasonable profitability that justify that there are customers who are making that choice. They have no mandate to come to me.
One obvious reason why we should be here is capital. The country is still short of capital and so (the) more the merrier. Look at some of the private banks—74% of their capital is foreign.
It’s a kind of academic question but it is proved beyond doubt that the level of creativity in foreign banks is very high. Most of the local private banks have senior bankers who worked with foreign banks.
Having said that, I must also say that there is expertise in our state-owned banks. But their branch network is finite outside India and so there is not much of exposure to global banking. And there is the question of performance-related pay which gives a different level of motivation.
There is merit in having competition. You are seeing what is happening in the aviation sector. I am sure you will be able to justify why we should not only have foreign banks but also have more foreign banks.
Foreign banks account for about 7% of the industry. What is the ideal level?
It has been like this for the last 15 years. It’s very difficult to give you a number as it really depends on so many things. It should go up and it is fine as long as it is gradual, for the right reason and in the right areas.
Will you spend more time in India now?
I live in Hong Kong, but once a month I come to India, China and Singapore and London, where our board meets 10 times a year. I spent three weeks in India last month because of the IDR. My visits are activity driven.
Post IDR, any gift for Indian consumers?
Scope was a landmark and now we have done the IDR. It’s only the beginning. We haven’t scratched the surface in India yet. If we can make as much in Hong Kong, which is a tiny fraction of India’s economy, potentially the Indian business could be several times bigger than what it is today. The arithmetic is very clear. India has to be a very, very meaningful place for us.