'We will look at every opportunity here to grow'
Though there are early signs of slowdown in consumer credit, corporate credit continues to be strong, Standard Chartered CEO Neeraj Swaroop speaks.
By George Smith Alexander, TNN |
India was the third largest generator of profits for Standard Chartered Bank in 2006. The country accounted for $403 million of profits, which came third after Hong Kong ($888 million) and Korea ($454 million). The bank has been looking at organic and inorganic expansions in the country.
Standard Chartered has been the largest foreign bank in the country after its ANZ Grindlays acquisition in 2000. Along with Citibank, Stanchart is the only foreign bank that has made a pitch to acquire every private sector bank on which RBI had declared moratorium. Other than taking over Grindlay’s operations, it has also taken over Sumitomo Mitsui Banking Corporation’s operations and has also applied for the takeover of Bank of Bahrain and Kuwait’s business in the country.
Driving the bank’s growth strategy is Neeraj Swaroop, who took over the mantle of CEO at Stanchart in 2005. He was earlier the consumer banking head of HDFC Bank. It’s for the first time that a senior private sector banking official is heading a major foreign bank, thus reversing the trend. His move to head StanChart is was seen as a part of the group’s strategy to revitalise the bank’s operations in the country.
The group has been bidding for old private sector banks and even for other enterprises like SICOM. What are the plans for the group in India, especially if India has to retain being the third largest market for the group?
India is a top priority market and we will look at every opportunity here to grow. Currently, regulation doesn’t permit us to do much inorganically, but when it does, we don’t intend to let any good opportunity pass us by. Our focus, however, will be on organic growth and there is enough opportunity to grow in India organically.
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For the last few quarters, StanChart has been going slow on retail, be it housing, credit cards, and has exited auto loans. There have also been rumours of the bank selling its home loan portfolio. What are the reasons for slowing down the retail business?We are very bullish about consumer banking in India. We are not slowing down retail. We are focusing on parts of the retail segments and our focus is on SME, wealth management, personal loans and cards and we have been growing these segments aggressively. We are not aggressive players in the mortgage space as they are commoditised products and do not give us attractive enough returns. However, we are in the mortgage markets and will continue to expand at our pace.
You need to understand that profitability forms the cornerstone of StanChart’s strategies. If market dynamics change and certain business segments don’t remain very profitable, we take a conscious decision to go slow or wind down, albeit temporarily. That is why we exited the auto loans, and have not been aggressive with mortgages and credit cards recently.
We were early to spot the downside and revised our strategies accordingly. I believe, now others are beginning to do the same. On the other hand, there are other parts of the consumer business that we are growing very rapidly. Our SME business has almost doubled in the last nine months, and the personal loans business is growing at double digits.
What are the kinds of activities that would be the revenue drivers for banks in the next couple of years?
We expect both the consumer bank and the wholesale bank to deliver strong performance in the coming years, and across all product categories. In wholesale banking, we are increasingly scaling the hierarchy of our clients’ needs from traditional working capital loans and transactional banking products to more sophisticated products like derivatives and options, M&A advisory, leveraged financing, etc.
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Both SME and Middle Markets will show exceptional growth as these companies scale up. In consumer banking, wealth management, unsecured loans and consumer finance businesses will be the better performers largely as a result of higher incomes and change in spending habits.
The new businesses, which we launched in the last 2-3 years like corporate advisory, consumer finance, project finance and microfinance are now gaining traction. You will see us grow them aggressively in the future. We will also launch private banking in May, and that has great potential. In India, we’ve brought in almost every product that we
offer globally.
How is StanChart looking at meeting the priority sector targets given that the government seems to be serious that banks fulfil these guidelines?
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We have always met the priority sector targets, and expect to continue doing so. We are proposing to expand our MFI portfolio. Also within our SME business, there are clients who qualify for priority sector guidelines. SME and MFI would make it easier to meet these guidelines. Compared to other foreign institutions, StanChart seems to be going slow on the NBFC side of the business. What are the group’s plans for NBFC?
Our NBFC does both wholesale and consumer. We run our consumer finance business, branded Prime Financial, through our NBFC which we launched 19 months back. On the consumer front, we have plans to expand branches from the current 45. We intend to grow our consumer finance through both branch and non-branch driven models.
What are the group’s plans in the retail broking sector? Would the group look at a greenfield venture or will it look at inorganic route?
We are very serious about getting into equity broking. It will be a good fit for our wealth management and private banking platforms. We have recently bid for a strategic stake in UTI Securities, and await the outcome.
At what point, do you think interest rate hikes will start affecting demand?
Rising interest rates have started to slow down credit marginally. The demand for credit is strong and not very price sensitive. There are early signs of consumer credit slowing down, but there are still no signs of slowdown in corporate credit. It’s driven by the opportunities that they are seeing. Higher borrowing cost will eat into their profitability. As long as they see the benefit of these investments and can absorb the higher cost, they will go ahead with their plans.
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