India replaced Hong Kong as the biggest contributor to Standard Chartered’s global profits in the first half of 2010. Jaspal Bindra, chief executive officer for Asia, who joined the bank’s global board on January 1, tells Sumit Sharma that India, along with China, remains a dominant and promising growth story. Excerpts:
India has become the highest contributor to Standard Chartered’s global profit. Do you see India retaining its No. 1 position?
Greater China and India are the two big core markets. We see them as the two most dominant markets for a long time. We are not that concerned about who is No. 1 and who is No. 2. The comfort we get from these markets, both being $1 billion in profits, gives us a huge amount of resilience. We hope we can find another one or two markets in the billion dollar club.
How important will India be in the next five years?
India has been important for quite a long time now. It will only grow in importance from here. Economies of both India and China are humungous. They have the potential to grow both in terms of GDP rates, in terms of the demographics, in terms of the penetration, financial services and the per capita income. Whichever way you look at it, these markets have a lot of room to grow.
Standard Chartered has been the most aggressive acquirer, taking over ANZ Grindlays, UTI Securities, among others. Going ahead, what kind of acquisitions would fit best in your expansion plans?
Most of our growth has been organic. We have been early movers in a whole lot of acquisitions. Even when we took over Grindlays, there was a lot of talk about whether we paid too much and if it made sense. So, it’s not just about getting an acquisition, but it’s also about getting the right one. American Express was a good example. See what it has done to our private banking: it has transformed us. We feel strongly about organic growth because our markets are growing so fast that we can keep growing strongly for several years without having to make any meaningful mega acquisition.
Acquiring local banks is not very easy for foreign banks. Apart from acquisitions, what else can you do to expand your business in India?
Alliances can be very powerful media of expansion in a country where distribution can be constrained. It’s a combination of expanding product range, expanding distribution through alliances and the brand. Most importantly, we are waiting for the blueprint that will be released by the Reserve Bank of India (RBI) later this year.
What would you like to see in the RBI’s blueprint ?
When it comes to regulators, we are quite shy of predicting. It could be any sort of liberalisation that will meet national priorities. As we understand it, one of them will be financial inclusion. The other is to bring competition and development in the financial sector. Yet another is to embrace globalisation. Whichever way we look at them, it does mean there’ll be room to expand distribution, or there’ll be room for us to bring in new expertise that’s not here at present, or it will allow us some room for consolidation. Whatever comes out of the new blueprint should have an upside for us.
Will you still be interested in acquiring units of foreign banks?
If we can get distribution or some level of expertise, we’ll be very happy. We will look at everything that is available in India. Within that, our priority will be to find players that will give us distribution advantage or capability advantage.
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So far as distribution and alliances are concerned, you have tied up with Agricultural Bank of China. Do you envisage any similar agreements in India?
Indian banks are still not bitten by the international bug in the same way as the Chinese banks. The Chinese banks want to go international big time to serve their customers globally. We don’t see the same level of urge from local banks in India or at least not very uniformly. So, there is a quid pro quo one can provide in return for being able to exercise or exploit their local distribution and customer base. When the time is opportune, we will like to enter into similar alliances with Indian banks.
Do you feel constrained by the number of branches you have?
It is difficult to say you are constrained if you are growing ten-fold in 10 years. We were $100 million in 2000 and are $1 billion in profit now in this market. So, it won’t be appropriate to say we are constrained. We are not looking for 4,000-5,000 branches. We are close to 100 and if we can go three to four times of that, we will be happy. We are not that hung up on branches alone.
What are the lessons from the financial crisis?
It will be a while before we can say the sovereign crisis is completely over. Lessons for India? There was a level of “we are too big to fail” which came to haunt the financial sector and the developed world in many geographies. In the US, Wall Street took control of policy-making. I don’t think that is a risk in India.
Three-fourths of your profit comes from Asia. Could an Asian city claim to be Standard Chartered’s new or alternative headquarters?
In a way, this is already the case. If you look at the business hub, it’s all in Singapore; both our wholesale and consumer banking are managed and run out of Singapore. Our operational backbone is largely between India and Malaysia. Our new global businesses are being developed largely in Singapore but offshoots are in Hong Kong and Dubai. Of our 80,000 employees, only 1,500 are in the UK. But, is there any other place that has more advantages (over London)? On a single basis, yes. But then do they have a depth of market? The issue is whether the UK will correct itself in three to four years. If one gets a sense it’s irreparable, we will do what is right for the company and the shareholders.
Should India go for a super regulator?
None of the models has proven to be entirely correct or entirely wrong. More than the model, it is the talent (that matters). In many countries, it is difficult for the regulatory arm to attract talent, and that’s why Wall Street took control over policy makers because the regulators don’t even understand the kind of derivatives the guys in Wall Street could think of. That risk is not there in India.
India needs a huge amount of capital. It needs a trillion dollars for its infrastructure. How can Standard Chartered help?
We would like to do our bit. Our total India balance sheet is $40 billion. And that’s only a fraction of our actual outlay. What we underwrite is a much larger amount. Then there are sectors where we have much more — telecom, energy, aviation, etc. We helped in deals such as Corus, Jaguar Land Rover, Bharti, etc. We have two mega deals in the pipeline at the moment.
The bank is increasing its headcount across the region. What are the plans for India?
Globally, we rose to 80,000 from 75,000 last year. In India, we hired 2,100 last year and will hire another 2,300-2,500 this year.