Mumbai: Dutch financial services conglomerate ING Groep NV, which holds a 44.19% stake in ING Vysya Bank Ltd, is struggling to catch up with its peers in India such as Citibank NA and the Hongkong and Shanghai Banking Corp. Ltd.
ING is the only international group with a controlling stake in an Indian private bank, but according to Philippe Damas, chief executive officer of ING’s private banking in Asia, it has lost a lot of time in this investment on account of a lack of focus.
Growth avenues: Damas says his firm will continue to search for growth areas in India.
ING took management control of the bank in 2002. Since then, the bank’s assets have grown about threefold, from Rs10,718.34 crore to Rs31,857 crore. The group is not happy with the growth as local as well as foreign banks during this period have grown their assets many times, riding high on the world’s second fastest growing major economy, which grew at close to 9% for four consecutive years between fiscal 2004 and 2008. However, there will not be any change in the bank’s strategy in the near future.
The group’s recent announcement to focus on creating a predominantly European bank with one integrated balance sheet will delay its expansion plans in Asia and India.
In an interview Damas spoke about ING’s investment in Vysya Bank and why it failed to capitalize on the opportunity in India. Edited excerpts:
ING does not seem to have a clear business strategy for ING Vysya Bank.
It’s not a fair comment. I think we have a strong, experienced team in place. We have strong support from the ING Group and are systematically posting profits for the past two-three years.
Now I am a lot more certain that the growth will be achieved. We are aspiring to have a larger market share in the liability and asset markets. On the asset side, we would look at traditional products such as mortgage, a variety of personal loans, community and agriculture loans and loans to small and medium enterprises.
You haven’t been able to capitalize on your investment in ING Vysya Bank.
There is some truth to that criticism. It takes a while before a company transforms from being a local or a regional company to an international entity. We took quite a while to study the dimension of the bank and identify the growth areas. We have lost a lot of time in this investment on account of lack of focus. Though our investment in Vysya Bank goes back to about 10 years, our real interest in the investment came about only two-three years ago when Vaughn Richtor assumed charge of the bank.
Why don’t you show some aggression in your India operations?
We will continue to stick to our strategy and search for growth areas. ING Vysya is too small to be ambitious to gain market share. For us, growth means targeting higher deposit growth, entering new geographies and opening new branches.
We are in a better position to do that now as you would appreciate we had a number of issues to deal with in ING Vysya Bank. The bank’s risk management systems as well as financial reporting was not up to date, the relationship with the regulator was not at its best. Besides, quality of people had to be improved.
Will the recent Dutch government support to ING restrict its capacity to infuse capital into the India operations?
We are adequately capitalized but not as much as our peers and we would need to capitalize the bank sometime soon. The recent capital infusion by the Dutch government in ING Group should not affect the bank’s capital infusion plans in other markets.
Through the recent capitalization, the Dutch government has nominated two members on the bank board and there is no government representative in the bank’s management team. The capital infusion is a process which is linked to the amount of capital needed by the bank. Up to a certain amount it is within the scope of the management team. I am not revealing to you any big secret, but if we consider the past instances of capital infusion, then I can simply say that capital needed for India operations would remain within the prerogative of the management team.
ING has never appointed a CEO of Indian origin since it took over the bank. Why are you going for a local CEO now?
It’s certainly a conscious decision. I am a strong believer in meritocracy and if an individual is capable, I am not concerned if he is coming from Mars or the United States. The most relevant factor is the qualification.
We will get the best person. But I also believe that being in India, we should have an Indian as the person understands the market well. That’s not the overwhelming factor, but an important factor.
Our management team has majority of locals. We have just about 10 expats working for the group in India.
Would you consider selling your investment in ING Vysya Bank?
ING was on the way to become a multinational bank by seeking participation across Asia but this has now been delayed. However, the strategy is not going backward but building on our existing operations and not seeking new participation.