While other foreign banks are still shrinking their loan portfolio, Standard Chartered Bank says it is seeing a double-digit growth. In an interview, Neeraj Swaroop, Standard Chartered's chief executive officer for India and South Asia, tells Sudeep Jain & Sidhartha that the bank intends to expand its offerings by adding equity fund-raising for Indian companies. The bank will, however, stay from small-ticket personal loans and acquisitions sans branches. Excerpts:
From the way your people are calling up for credit cards, it seems you are the most aggressive foreign bank in the retail space. Are you fully back?
Yes, but only in segments where we want to get into a leadership position. In cards, we are pushing the lifestyle premium cards a lot more and we have had a good experience in that category. STPL (small-ticket personal loans) was more a pilot kind of a story and we stopped originating such loans more than a year ago. And, we don't want to get back into STPL at this stage.
We are doing unsecured personal loans, but our model there is to concentrate on our existing customers and, hence, risk can be priced better.
Will you come back to the auto loan market?
No, we exited the business three years ago. At that time the market had become highly commoditisedand it was not relationship-driven. The whole pricing mechanism had become non-transparent to the customer and margins had shrunk. May be, the margins have come back now, but it's not a business segment that appeals to us. We would rather be in segments where we can leverage client relationships better.
Foreign banks are still shrinking their loan book, which they say is partly due to a lack of demand. What is your experience?
There are signs of a pick up, but I wouldn't say it's significant. But then our broad business model is not lending-driven like other Indian banks. So, if you look at our growth numbers, they look the same as a year ago. We grew our loan book between 12 and 18 per cent in the last three years and we continued to grow in a similar manner through the crisis. But there is an impact on credit demand on the industry as a whole.
Right now, the challenge is not so much availability of credit but demand. Probably by February-March you should begin to see a stronger pick-up in demand.
Do you think other source of funding, such as mutual funds, commercial papers and other instruments, are responsible for the decrease in flow of banking resources to the corporate sector?
Till a few months ago, there were complaints about bank lending growing too fast. At that time, bankers were saying that we are the only source of fund left for the corporate sector because global markets had dried up. But the absolute flow of funds to the industry was not high. A year later, it's the other way round. Because of the base effect, banking credit growth is looking low, but it's not as if the fund flow to industry is hurting because there are more options available today.
Was the collapse of the Bharti-MTN deal a big setback and what is the deal pipeline like?
In corporate advisory, we pursue many deals at the same time. You heard about Bharti-MTN because it was such a high-profile deal, but there are many deals that you wouldn't have heard of. At any time, if we pursue N number of deals, but only a few would materialise. That's how M&A advisory game works globally. But the deal pipeline in India remains strong.
How will things change for the bank once the proposed Indian depository receipt (IDR) issue happens?
Technically, it does not change anything for the bank. What it does is to help improve our presence in the country because you are bringing one more element to engage with the banking public. So, you are not just bringing in banking services, but you are also bringing in the Standard Chartered stock so they can become investors. It gives the Indian public a chance to participate in risk and opportunity on the global scene. It also demonstrates to the policy makers our continued commitment because we would not list if we were not here for the long term.
Apart from Royal Bank of Scotland, there are others who are said to be looking to exit. Will these acquisitions make sense?
India is a top priority market for Standard Chartered. We would be interested in everything that can be an opportunity, and which is within the existing regulatory framework.
Even without branches?
If it's without branches, we may not look at it after the first five minutes. Obviously, there are a certain criteria, and we have to segregate those we are interested in and those we are not interested in. If it adds to customers, to branches, to profitability, we will look at it.
Going forward, do you see some change in your strategy in the light of the experience of the past 18 months?
It reinforces some parts of our strategy, like being in the right market and having the right business model, and we will pursue them more strongly as we learn more from the crisis. At all levels of management, we are completely tuned in to make sure that the balance sheet is managed very well.
In the past, our wholesale structure was driven through a relationship management chain with all products flowing through that chain so that the relationship with the customer was fronted by our OCC division (origination and client coverage or what others call corporate banking).
We are even more certain that's the way we want to go. We don't want to do single product relationships. Similarly, on the consumer side, we were very product-driven but had started to change even before the crisis. Again, our strategy is to fill the capability gaps that we have.
So, what gaps have you identified?
On the wholesale side, for example, we were a more transaction and working capital lending bank about five years ago. We have added project finance, M&A advisory, private equity and derivatives. One of the areas we have not been doing is on the equities side. We don't have ECM (equity capital markets) products if clients needed that service. So that's the area we have been working on. In 2010, we will be offering that suite of services to our customers.
