The Australian banker is happy to be in a country that is poised to become the centre of the global financial action
At six-and-a-half feet and dressed in a royal blue business suit, it isn’t difficult to spot Stuart Davis, CEO of HSBC, as he strides down the gleaming marble alley of the Taj Mahal Hotel at the appointed hour for lunch. The Taj is like a second home for him. He lived here for six weeks when he arrived in April last year before moving to his Malabar Hill residence, and the hotel was still struggling to restore its century-old heritage wing after the November 2008 attacks, writes Sumit Sharma.
Davis chose Masala Kraft for our meeting, the timing coinciding with the India versus Australia cricket series (but before the latter’s comprehensive Test defeat) and the start of the controversy-ridden Delhi Commonwealth Games, which followed the smoothly functioning Melbourne Games four years before.
Preliminaries over, we get down to choosing our meal. “There is nothing on this menu that I don’t like,’’ he says. A lawyer by training who has been with HSBC since 1981, Davis thinks Masala Kraft is a good introduction to authentic Indian dishes for overseas visitors. He is so partial to the galouti kebab and dhhohiya murg tikka that he wants to visit Lucknow to check out other Mughlai dishes. But for this meal he chooses paper-wali macchi, which, as the name suggests, is delicately fried paper-wrapped basa fish and chilgoza falli that has roasted pine nuts and string-less green beans as the main ingredients, blended with coriander and cherry tomato, among other condiments.
Davis considers himself lucky for India. When he arrived, the country was trying to shake off the effects of the global economic slowdown, elections to Parliament were underway and everyone expected a hung parliament and the Sensex was at 9,000. Today, the Sensex is close to its 2008 peak and growth forecasts for India are higher than most other major countries bar China.
Since India and China are now the hot financial destinations after the sub-prime crisis diminished the stature of London and New York, Davis is delighted to be in the thick of action, although he’s the less visible face of one of India’s top three foreign banks with Naina Lal Kidwai as country head for HSBC Group, who supervises the bank and its other businesses in India, including insurance and asset management.
Attempting to counter the standard expat line on India, I try and provoke Davis by asking him if he thinks India is fair to foreign banks, a grievance many foreign bankers express strictly in private. Davis spots the googly well in advance and instead diplomatically sets out what he’d like to see in the Reserve Bank of India’s discussion paper on foreign banks.
The devil will be in the details, he says. He will be watching for tax changes and whether foreign banks will need to raise their priority sector lending to put them on a par with local banks. As with most foreign bankers, he would be happy if the new rules also permit them a few more branches in locations of their preference, especially in the major cities.
But he is quick to clarify that foreign banks don’t wish to and can’t compete with public sector banks. Foreign banks typically don’t have more than a tenth of the market, he adds, and they are happy to grow as the size of the cake expands, which it promises to do so much faster in India’s case. As the banking system starts using more technology, life will change for the better even with a fraction of the branches that public sector lenders have. HSBC has 50 branches and alliances, which take its presence in a limited way to 177.
HSBC, he says, will focus on trade finance and wholesale banking. Wealth management, mortgages and selective credit card issuances will mark its retail banking, which suffered losses triggered from the 2008 global slowdown. It lost on unsecured loans, personal loans, consumer financing business and credit cards, forcing it to curtail personal loans significantly. The bank plans to build its cards portfolio selectively after segmenting the market. The crisis brought a sobering realisation that India’s billion-plus population is no indicator of the size of its credit card potential. But its future potential can’t be ruled out either so HSBC plans to have a well-run credit card business that can be scaled up when the market improves.
In the meantime, Davis is happy with the “world’s local bank” campaign — but says the bank is not immediately keen on an Indian Depository Receipt (IDR), the route Standard Chartered Bank took to establish its “global and local” credentials. An IDR at this stage could pre-empt the listing of a wholly-owned subsidiary, if need be, he said.
Like many other bankers in India, Davis also said he would like changes that would attract more long-term funds for infrastructure from pension and life insurance.
On the savings rate, one of the last few areas left to be deregulated, Davis draws upon the experience of his home country Australia, which despite protests and apprehensions went ahead with liberalisation, turning its banking more efficient. India could set a time frame of, say, two years and gradually ensure the savings rate too is freed, he suggests. Such changes will also remove cross-subsidies from other banking services and help the system as a whole and customers in particular. Customers would also get incentives to move towards lower-cost options such as the internet banking rather than the costlier option of banking at a branch.
Banking issues obviously absorb most of Davis’ time but as we tuck into the kebabs, which duly melt in the mouth just as the menu promises, he says he’s keen to know India better. He’s already been to the Andaman Islands and Kochi in the south, Pantnagar in the north, Rann of Kutch in the west and plans to visit Guwahati in the east. His son and daughter, aged 21 and 23 respectively, simply couldn’t stop talking for days after their two-day trip to Varanasi, he remembers with a laugh.
Even as he explains the intricacies of banking, the waiters are careful to ensure us their undivided attention, and serve us the fish — which reminds him of hilsa and his overdue trip to Bangladesh, where HSBC is headed by an Indian who keeps drawing on his friends at the bank in Kolkata.
Since we’ve paid our due respects to the excellent repast, I judge it’s a good time to ask Davis what he considered the downsides to India’s growth. India’s restless neighbourhood is one, he says, the current-account deficit another; inflation, government debt, subsidies, the fiscal deficit…. He would keep an eye on the negatives, but has enough faith in the country’s regulators not to be unduly worried, he says.
My efforts to lure Davis with a malai kulfi failed — he’s too physically fit to be eating sinfully calorific desserts. Although he manages a round of golf on the weekends, he regrets not being able to indulge in his passion of walking down Mumbai’s crowded central business district. A Shane Warne fan, he loves the tradition and history associated with the Ashes, the cricketing rivalry with England that’s now approaching its 130th year, but admits he plans to keenly follow the current series with India since it determines the number one spot in the ICC (International Cricket Council) rankings. Given those results, he’s probably focused on the Ashes now.
