 "P S Jayakumar")
Bank of Baroda, the Mumbai-based public sector lender, awaits chief executive officer-designate P S Jayakumar this week.
A former Citibank executive, he was selected in August from private sector firm VBHC Value Homes, where he was managing director and CEO, to be managing director and chief executive of BoB.
At present BoB has only one full-time executive director (ED) in B B Joshi. Ranjan Dhawan, MD & CEO-incharge, retired on September 30. The bank has been without a full-time CEO since the end of July, after S S Mundra, then CMD, moved to the Reserve Bank of India as deputy governor. K V Rama Moorthy, another ED, was abruptly moved in August to Kolkata-based United Bank of India.
Jayakumar faces some challenges in his new role. The first one would be his acceptability within the bank, especially since he is making a shift from the private sector. Though, say two senior BoB executives, given the long-standing professional culture at the bank, the new MD & CEO is unlikely to face much resistance.
The bank has also been through a systematic restructuring and repositioning under then CMD Anil Khandelwal about a decade earlier. It came up with a new 'Baroda Sun' logo and brought Rahul Dravid as brand ambassador. With Mallya as CMD from 2008 to 2012, it gave the bank time to build systems and stabilise operations.
Jayakumar will also find support from Bengalorean Ravi Venkatesan, appointed non-executive chairman. Venkatesan, 51, had a successful innings in the private sector, including as chairman of Microsoft India between 2004 and 2011.
Jayakumar's second challenge would be to learn to deal with the government system. One BoB executive said, "He is fortunate in coming at a time when the (central) government has begun to work at arm's length, and is giving more autonomy."
The government has 57.3 per cent stake in BoB. It had issued a circular that there would be no interference from the government and banks would be encouraged to take decisions independently, keeping the commercial interest of the organisation in mind. A cleaner distinction between interference and intervention has also been made.
The chemistry with employees (a little over 49,000) will be a key determinant to chart the course for staying competitive and grow the market share on both the assets and liabilities side. Staff unions are a significant interest group, whose cooperation will be necessary. "Given the limitations on incentives and absence of power to hire and fire, it will be worth watching how the new CEO builds and manages rapport with union functionaries," said a trade union executive.
Public sector banks, including BoB, have seen a large number of employees retiring across levels and this will continue for the next three years. There is also a talent scarcity in the middle and senior levels.
Though the bank has engaged in large-scale recruitment in recent years, the gaps in skills and experience will remain for some time. Jayakumar will also have to deal with challenges like huge training requirements, succession planning and engagement for higher productivity.
With half the current financial year over, the framework to drive business in FY16 is in place. The bank also has a plan for the next five years -Vision 2020 - in place, approved by the board of directors. Financial analysts expect Jayakumar to make an impact from the next financial year.
The sector, including BoB, has faced a challenging environment due to the economy's slowing. Asset quality pressure continued to weigh on performance in FY15. BoB had been expanding its business - loan book and deposits - at a pace higher than peers between FY09 and FY14. It shifted to the slow lane in 2014-15 and focused on consolidating its book, and improving efficiency and asset quality.
Profitability declined in FY15 on account of higher provisions for impaired assets, tax provisions and sluggish credit growth. Its total business - advances plus deposits - increased by 8.25 per cent to Rs 10.5 lakh crore, while net profit declined by 25 per cent to Rs 3,398 crore in FY15.
In an environment characterised by sluggish economic growth, the retail segment has been the de facto engine of credit growth. Foreign brokerage Jefferies in a note on the lender said BoB's retail loan book mix had contracted over the past five years. Branch efficiency on both retail loans and the liability franchise (current and savings assets) is not strong.
The share of retail loans in its total portfolio is about 12 per cent - State Bank of India's is over 20 per cent. BoB has significant headroom to improve its share of low cost deposits (current and savings accounts), which can go up from the 33 per cent in FY15.
