To start with institutional & corporate banking; would like to open 25-30 branches over next 4 yrs.
Australia and New Zealand Banking Group (ANZ) has drawn up an ambitious plan for operations in a country it exited 11 years ago.
It opened a branch in India recently and wants to start with institutional and corporate banking, followed by wealth management. It has planned to open 25-30 branches over three to four years. Till now, the banking regulator has followed a restrictive practice in giving branch licences to foreign banks; for Indian entities, the regulations have been relaxed in the past couple of years.
“We have opened a branch after 11 years of absence. In the first stage, we will do institutional and corporate banking. Then, we plan to enter commercial banking and then the wealth management segment, catering to affluent retail clients,” said Michael R P Smith, global chief executive officer, in an interaction on Wednesday.
The plan is to open 25-30 branches over the next three to four years if regulation allows, added Alex Thursby, its CEO for Asia-Pacific, Europe and America. The banking major is targeting 25-30 per cent of its revenue from the Asia-Pacific region by 2017.
Though expansion will mainly be organic for ANZ in the Asia-Pacific, the bank will be mindful if inorganic opportunity arises. “Organic growth is the way we see, but that does not mean we are not open to mergers and acquisitions. It has to be (acquisitions) a strategic fit and value for our shareholders,” Smith said. “A number of banks in Europe and possibly the (United) States are going to sell assets to improve their capital base. They will have to sell some of the family silver."
Though Smith is “very worried” about Europe’s economic problems and its knock-on effects to other regions, he expressed confidence on the Asia-Pacific region.
WHY INDIA AGAIN
The bank was candid enough to admit the decision to exit India a decade earlier was not the correct one, as the country’s growth picked up in the following years. Now, with a substantial portion of business coming from Asia on the back of a ‘super regional strategy’, India is not a place the bank intends to let go.
“We have developed a super-regional strategy and we want to have about 30 per cent of our earnings from the Asia-Pacific region by 2017. If you have a super-regional strategy for Asia, you’ve got to be in India. The business we have started here will be developed over time,” Thursby said.
The bank believes it has the ability to do business in areas such as agriculture, natural resources and infrastructure. “We have expertise in these areas and India also needs these sectors to grow to sustain economic development in the long term. So, the stars are aligned,” he said.
PRIORITIES
While most foreign banks aim to tap the growing Indian retail consumer segment by providing home loans and credit cards, the margins on which are healthy, ANZ will give it a miss in the initial years. The bank will go for retail, and for the affluent segment only, only when its gets the branch network to support it.
“Our business model round the globe is like we open the batting with institutional business. Then comes affluent wealth at number three or four and at five or six, we have the commercial supply chain. We will follow that batting order here. So, Sachin Tendulkar will be batting at four or five,” Thursby said. The bank sees its retail wealth management business going fully on stream in the next five years.
SUBSIDIARY ROUTE
Though most foreign banks in India are not keen to take the subsidiary route, which the Reserve Bank of India favours, ANZ seems open to the idea. “We are operating in many countries with local incorporation. Australia was one of the first countries to do this,” said Smith. Though, he adds, there is a cost associated with such practice, as the subsidiary is rated lower than the parent. “We think there are very good reasons for local incorporation of foreign banks. Australia was actually one of the first countries to do this. We will look at the pros and cons of having a subsidiary here very closely. We are not ruling it out,” Thursby added.
