Standard Chartered Bank today announced the appointment of Jaspal Bindra to the bank’s global board of directors. As part of its strategy to diversify its board it also roped in former South Korean Prime Minister Han Seung-Soo, AstraZeneca CFO Simon Lowth and Former HSBC Finance Director Richard Delbridge as independent directors. Bindra, at present CEO, Asia, will keep his focus on growth and governance in Asia as Group Executive Director. The 49-year-old banker, who joined Standard Chartered from UBS Investment Banking in 1998, spoke to Sidhartha about the bank’s strategy. Excerpts:
There was Dubai, now there is Greece. Are these hiccups to the recovery?
It was expected that recovery will be slow but also bumpy. The fundamentals that created the challenges are still there and they have to be sorted out. There are big imbalances such as too much savings in the East and high leverage in West that need to be sorted out. The good news is largely due to the fiscal stimulus, which is a one-off.
The bank had a large exposure to Dubai; will that change your strategy for Asia and India?
One of the strengths of the bank is that it is very well diversified. We are diversified by business and by products. No single market is material in that sense. We have said the Dubai crisis will not have any material impact. We keep reviewing our strategy and we did so during the financial crisis and found everything in order. My joining the board is recognition of how important and relevant Asia is for us.
Whichever measure you use, be it profit, income or number of branches, India is a very important part of the franchise for the bank. We have a long history and we have huge ambition. In the last five-six years, 70-80 per cent of the growth has largely been organic and that will be the strategy going forward. The market offers relatively higher growth than other parts of the world and the potential is huge.
The demographics, the rising income levels support growth. Like any other sector, the per capita consumption and penetration level are low. To meet our aspirations and client needs, we are expanding our product suite in the wholesale bank to include commodities. In the consumer bank, we are trying to standardize and re-engineer some of the processes.
By when should we expect the India Depository Receipt issue and how are you going to use the proceeds?
IDR is more important than raising capital. We are very comfortable on capital. We thought that it was a time to show our commitment to India and one good way would be to list in India. Five years ago we listed in Hong Kong and India is at the same level today. The issue, subject to market conditions, is expected sometime next year. The earliest we can do it is after March since we will need an audited balance sheet.
In India, foreign banks face branch restrictions. Will that limit your ability to grow in the future?
On the wholesale side, we find no restrictions because we can do everything that a bank does. So, we are not at a disadvantage in any way. On the consumer banking, the reality is even if we were given full freedom to open branches, we will not be able to match the network of State Bank of India or any other nationalised bank. From a very small share of Standard Chartered’s operations 10 years ago, India is now a very meaningful contributor. During this time, the number of branches has increased from around 60 to 90 now. So, we do not feel discouraged in any way, as the market is too big.
Which part of your business will drive growth in India?
The wholesale bank has seen a CAGR of over 40 per cent over the last five years. On the consumer bank, there were some issues last year because of the overall environment but the potential is huge. Dealing with one billion people is a big challenge so aim to create profitable model that can help us tap the potential.
The Chairman of the Financial Services Authority (FSA) has said that global banks should structure their international operations not as branches but as subsidiaries with their own capital and liquidity. Will that be feasible for banks like you?
There are a lot of things that are being discussed at the moment but we will wait for the outcome before commenting on it. There is discussion on more capital, the ratios and capital for various businesses. It is still early to talk about how things shape up. Broadly, the direction is known but the move will be gradual. We are quite prepared to be nimble to respond. In some ways we are ahead of the curve, since we have the strength of our balance sheet.