Greg Guyett, chief executive officer, Global Corporate Bank, JPMorgan, tells Somasroy Chakraborty though the fees in investment banking are shrinking, a long-term relationship with companies through the corporate banking arm would offset revenue losses: Edited excerpts:
Do you think the current crisis is as severe as that in 2008?
The fundamentals of the US economy are still reasonably good. There is a risk that financial contagion from what is happening in Europe and US and frankly, what may happen in the US, if there isn't a credible debt reduction plan, could come back and affect the confidence. I think the whole world is going to be impacted if the global economy does not continue on the recovery path that it started after 2009. We are already seeing migration from risk investments, risk assets, and if we see companies pulling out their investments, it would certainly have some impact on the Indian economy.
Globally, you plan to hire 300-350 bankers for your corporate bank. What are your plans for India? What would be India's share of the targeted $1-billion pre-tax income?
Asia, as a whole, would have more than a third of the total number of bankers we are putting in place. India is one of the two big-focus countries for the firm in Asia. I would be disappointed if, ultimately, our team here doesn't have 20 global corporate bankers or more. I also expect the team would grow over time, because more and more Indian companies are looking to expand their operations outside India every year. That's where we can help. We don't aspire to compete with Indian banks, which are strong and capable of serving clients in India. But when the client needs get more international, we think we can provide a service. I expect Asia to provide a very significant portion of the $1-billion pre-tax income. India would be a big centre for us in Asia.
Which are the businesses where you plan to add new recruits?
We are hiring people across all businesses but a significant expansion is happening in our corporate banking team. We look at the client coverage and integrate it in a holistic way so that our bankers have the opportunity to work across all the capabilities that we have as a company. We expand their responsibility, the number of clients they cover and that benefits our investment banking, market and transaction banking franchises.
What are the opportunities for JP Morgan in India?
There is traditional investment banking opportunity. Also capital raising for our clients from the local market is a big opportunity. We are confident that markets will stabilise and we are fortunate to have fully developed team with local equity raising capability. The areas where we are substantially investing to grow our corporate bank are broader platform for financial products for Indian clients, and commodities. We have invested several billion dollars in the last couple of years building a strong commodities business that covers both financials and physical aspects. Given the Indian economy and corporate focus on investing in commodities we think this will give us a good business opportunity. Our clients in the US, Europe and Japan continue to invest in India, which is also an area of growth for us.
Some foreign banks have already reduced the size of their investment banking teams. What are your plans for this business in India?
Our overall staffing in India is growing and it would continue to grow across our businesses. We are always deploying people where we think opportunities exist. India is a very important market for our investment banking business. We are a leader here. If you are a leader, you have to be pretty consistent with your coverage and team. We are not looking to dramatically change our team or commitments here. We have no plans for an across-the-board reduction in our team.
The investment banking fees in India are shrinking. How are you tackling this?
We try to ensure that when we work with clients, we are able offer a wide range of products and services. Investment banking is one of the services offered. That is why the investments we are making in our global corporate bank are so important. These allow us to provide complete coverage for a client's needs. We do believe the investment banking business in India is doing well and would do so over time. But we want to ensure that there are multiple things we can help our clients with.
Going forward, would corporate banking be more important than investment banking in India?
A couple of years ago, we did not have meaningful investment in corporate banking activity in India. I expect our investment banking business to grow, subject to market dynamics. But there is no doubt the global corporate bank coverage would grow substantially. The global corporate bank seamlessly combines offerings of our investment and transaction banks, and provides a holistic view of our most important client relationships — strengthening coverage, extending credit and expanding our penetration across products.
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The deal flow has slowed. How is this impacting you?
The overall deal flow has slowed this year, but the ones being discussed are not small in size. Some are even larger than what we saw in the last couple of years. The size of the transaction matters less to us than the kind of relationships we have with our clients.
Many Indian companies in the recent past have raised funds via foreign currency bonds. With the global sentiment turning weak do you expect these issuances to slow in the coming months?
Companies now understand that currency movements can make these issuances more expensive than they would have thought. But I think a lot of these issuances from Indian companies are underpinned by good fundamental reasons. We are definitely in for an extended period of very low rates in developed economies. So, I think these issuances will continue. The fundamental demand for foreign currency whether for making acquisitions or for financing raw material purchases will see Indian companies continue to borrow funds in foreign currencies.
Which are the currencies other than dollar that are gaining popularity among Indian companies?
Clients are enquiring about RMB financing. It is natural given the big pool of savings that exists in the RMB. I think this is balanced by some concerns over the currency appreciating over time. There are questions about usage of funds raised in RMB outside China. But discussions are going on. The dollar and the RMB are the currencies where most of the enquiries are coming.