There's no flab to cut, the challenge is to raise revenues
Centurion Bank of Punjab CEO & MD Shailendra Bhandari tells how the bank is eyeing more revenues, and one more acquisition.
By George Smith Alexander, TNN |
| Shailendra Bhandari, CEO & MD, Centurion Bank of Punjab |
Centurion Bank of Punjab (CBoP) is the only Indian private sector bank which has been involved in three acquisitions. And the appetite doesn’t seem to be waning.
CBoP has attained a critical mass through an inorganic route, which most Indian banks have not followed. What have been the lessons?
There are lessons if you look at all the three banks on a standalone basis — be it Centurion Bank, Bank of Punjab or Lord Krishna Bank. Size has its own compulsions. Smaller banks can do reasonably well in patches. For a few years, they could manage to break-even. That’s why we are committed to inorganic growth. One needs to have a critical mass of scale and branch presence.
We are now the largest private sector bank in Punjab, Haryana and Chandigarh and also the largest new generation private sector bank in Kerala. One needs to be in the league tables on a national level — at least among the top 10 banks.
What is the way forward for the bank now? What are the growth options?
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When you are from a small base, one tends to focus on the expense to revenue. Small banks are marginally profitable and just about to break-even. Unlike large banks, there is no flab to cut. The challenge is not to cut expenses but to earn more revenues. Our expenses to revenue was at 97%. We need to cut it to 50%. It is gone down from 87% in June 2004 to 67% in June 2007. We are now looking at raising our revenues as expenses start plateauing off. Our hard work is behind us and we will continue to focus on retail, which used to constitute 82% of our business. We will prune it to 50-60% of our business. We are very bullish on SMEs. Last year, our advances grew by 72% ahead of industry figures and will do better than the market this year too. Are we looking at one more acquisition? Absolutely.
Post the merger with LKB, the bank will now have a pan-Indian presence. Would you continue your inorganic growth route?
We have done three mergers till date. BankMuscat was a one-branch merger with Centurion. Centurion Bank and BoP was a transformational merger. They were banks of equal size as BoP has a good retail liability business and SME business and also a lot of synergies. LKB was by contrast a smaller merger as it was one-tenth of the size and was not transformational. It, however, brings us 124 branches and extension counters. Most of the non-Kerala branches have a high-street presence. These branches complete our footprint of mass-affluent customers. The next merger has to be transformational with a balance sheet of equal size.
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Rana Talwar is a private equity player who would look at an exit sometime down the line. What would happen to the bank and the management team in that case?
Some of this you need to ask Rana himself. He is a non-executive chairman of the bank. The core team, including myself, joined because we knew Rana, but now we have more than 7,000 people. Rana meets a lot of people but I don’t know how many people have met him, leave alone joined because of him.
Unless somebody is saying I want to pack up my bags and go, there is no need to say you will have to exit. That doesn’t mean that shareholders don’t have different thoughts. Rana has given a lot of vision to the bank and a lot of us knew him before. But he is obviously not involved in the day-to-day functioning. We also know that many things have changed. Back in 2004, we had 61 branches and 14 extension counters. We had a balance sheet size of Rs 4,000 crore. Today, we have close to 400 branches and a balance sheet size of close to Rs 25,000 crore. I don’t think anyone could have scripted that.
As a management team, we are very clear — we are growing this franchise as we believe we can build a bigger and a profitable bank. We believe that the value that anybody who is a shareholder or an employee wants to extract can be as much extracted from the market pricing and there is no compulsion to sell it. I don’t know, if tomorrow someone comes to Mr Talwar and offers him a crazy premium, would he be tempted, maybe, he would. That you have to ask him.
What do you think banks should do to handle the recovery process given that a lot of attention has been focused on some of these activities? What is your strategy for recovery?
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Whenever something gets played up, emotions get very hot. The two fundamental thoughts, which should be there are:• the bank is entitled to or compelled to recover the money if the lender has defaulted
• the other, which is equally true, is that you got to do it in a way which maintains the dignity of the individual. No one should take away either. Today, we are hearing about cases where possibly the dignity of the individual was not maintained.
The pendulum has swung and people are saying the bank in effect does not have the right to recover its money. This is systematically very dangerous as you will force banks not to lend. You need some balance. One of the worries is that the guys who are repaying will repay anyway, but some of the people who are opportunistic might take this opportunity to turn around and say, I am not going to pay you.
There have been talks of the bank rebranding itself post the merger with LKB. When will this happen?
The name is what it is, there is no change in the name. One thing which we are conscious of is that we have pockets of strength like in north and Punjab, and in Kerala, where we are reasonably well known in our LKB avatar. We also know that for a bank which aspires to have a national scale, our brand is relatively less recognised. That may be part of the reason why people don’t appreciate the scale and the size.
At some stage do we want to go for a single national name, possibly. It’s a thought. It’s a discussion. As of now we are not disturbing anything. We are looking to build on the brand, which is admittedly not strong enough, on a national level. Over the next few years will we look at changing the name, why not. We are not close minded.
Would the bank look at an NBFC licence?
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There are businesses which are good. For a long time, we were hesitating because we weren’t clear on what the regulators’ views were on giving bank’s NBFC licences. Again, because of the LKB merger, which has happened one month before, it’s not a top priority today. It would be something which we would look forward to do. Download
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