ICICI Bank to replicate Canada plan in the UK

The country's second largest commercial bank, ICICI Bank, is replicating its Canadian retail banking success story in the UK chanting the "India cost advantage" mantra.

"We will rollout branch expansion in the UK with 3 to 4 branches in the next two to three months," ICICI Bank's senior general manager and head-international banking group, Bhargav Dasgupta told Business Standard.

ICICI Bank will piggyback on the middle-office and back-office operations in India, that save it 70-80 per cent of operational costs in Canada. A similar cost saving is expected for its operations in the UK.

In Canada, ICICI Bank with about $214 million of assets in just nine months of operations has overtaken State Bank of India, which has over a decade of presence there.

Dasgupta said the basing of middle-office and back-office teams in India provides a huge cost saving when compared to the operations of a local bank in Canada. Even if ICICI Bank offers an interest rate three per cent higher than a local bank, the overall cost of funds in Canada will still be the same.

The cost of funds for a Canadian bank offering 1 per cent interest on a savings bank account adds up to 3 per cent because of operational expenses.

For ICICI Bank, the savings accrue from a lower manpower requirement in Canada and with the sharing of technology platforms established in India. The cost of manpower for ICICI Bank in Canada is just 16 to 20 per cent of that of a local bank, while the cost of technology is just 5 to 6 per cent.

ICICI Bank's operations in foreign geographies employ about 200 people, but the bank has double that strength deployed in India to provide back-office and product development support for customers in those countries.

Dasgupta said ICICI Bank will muscle in in the UK market with the same strategy as Canada offering technology-led offers, like internet banking, online remittances, etc.

The franchise building strategy in the UK will be on the same lines as in Canada, where 50 per cent of the customers served through its four branches are non-Indians.

ICICI Bank's subsidiary in the UK has achieved profitability in its first full year of operations through a single branch and has built total assets of $1 billion. The bank's assets base in Canada since commencement of operations in October 2004 is about $214 million.

Foreign operations of ICICI Bank constituted eight per cent of the bank's total revenues in the year ended March 31, 2005. The bank has set a target to ramp up share of revenues from foreign operations to 25 per cent in the next three years.

"All our international operations have reported profits in the first year itself, providing the comfort to plan faster expansion to newer geographies," Dasgupta said. After UK, ICICI Bank will expand to Hong Kong, the United States and Sri Lanka.