When Neeraj Swaroop took charge as the chief executive of Standard Chartered Bank in India in August 2005, the local business was the bank’s third most profitable operation after Hong Kong and Korea, with a pre-tax profit of $223 million. Five years into his reign, Swaroop has turned India into the most profitable market for StanChart, with over $1-billion operating profit. In an interview with Business Standard, he discusses plans and the regulatory environment in India with Somasroy Chakraborty and Manojit Saha. Edited excerpts:
You have made India the most profitable centre for StanChart in 2010. How do you plan to maintain the growth momentum?
The reason we have delivered is because we have multiple businesses and multiple engines of revenue. The diversity of our income streams and product lines gave us the robustness to grow over the years. The same strategy will help us to grow. In wholesale banking, the equities business we started last year, with the acquisition of UTI Securities in 2007, will become more important by 2012. UTI Securities, which is now a 100 per cent subsidiary, is the platform we will use. We are building on that to enter the institutional equities business and also in businesses like merchant banking.
Corporate finance and equities put together contribute over a third of our wholesale banking business. A third is contributed by transaction banking and the last third comes from the markets business or the treasury business. Our corporate finance business has now been strengthened by the addition of our equities capability.
Does the bank have a conservative approach on consumer banking?
Consumer banking in India contributes about 25-30 per cent of our revenue. On that side, our area of large business is wealth management. It is 35-40 per cent of our consumer banking. The other big thing is SME (small and medium enterprise), also the fastest growing segment and now contributing about 30 per cent of consumer banking business’ revenue. Then we have secured business, which is largely mortgages, about 15-20 per cent, and unsecured business, which is cards and personal loans, about 20 per cent.
I don’t think we have been conservative in consumer banking. It is just that the opportunities from wholesale banking are very different. In consumer banking, we have access only to larger cities and to the relatively more affluent segment. It is an attractive segment and we are focused on that but that is also the segment where we have the highest amount of competition. We have been growing consumer banking steadily by about 15 per cent (annually) but wholesale banking has grown faster.
Will there be a greater thrust on retail business if the norms governing foreign banks in India are liberalised? What are the positives that have come out from the discussion on foreign banks’ presence?
The biggest positive is that we now have a clearer idea as to what the Reserve Bank’s thinking is on the issue of allowing foreign banks more room in this market. But we clearly need to better understand the implications of this discussion paper. Certain things have to be fixed, like issues around capital gains tax. Then, there are issues like what “equal treatment” on branch licensing would mean for foreign banks. We also need to understand the impact of priority sector requirements on our business model.
RBI has said it prefers foreign banks to have a subsidiary in India. Do you subscribe to that view?
We are interested in this opportunity that India presents. But it is too early to confirm that we will or will not set up a subsidiary here. It is a development that we are looking at carefully. The attraction is that this gives us the opportunity to grow faster organically.
RBI had expressed some concerns on circular trading, which involved StanChart. Also, some reports claimed RBI had directed the bank to reshuffle some of its senior executives.
There was circular trading which RBI observed in the industry. They have asked us to stop some part of our primary dealership business. This was only the proprietary dealings, for clients we are allowed to do the business. This is only for a short period of time, for six months, which will get over by March. But this is an extremely insignificant part of our business. The linkage between this and our people is completely wrong. There is a lot of speculation if RBI has asked us to make some changes. That is incorrect. RBI’s concerns with the bank are different from the (change in role of some of the) people. RBI has not linked the two.
Have you stepped up your internal security following the revelation of fraud at Citibank’s Gurgaon branch?
Obviously, we were extremely concerned about it. We re-looked our processes, systems, controls, checks and balances to make sure the probability of such events is negligible. These practices were all there. But after an incident like this, we reviewed and made sure that the implementations were fine.
