A reference to The Federal Bank as an “old private bank” always gets Shyam Srinivasan’s goat. “It implies the bank is not contemporary.” The managing director and chief executive officer of the Aluva (Kerala)-based bank stresses that “it is among the best”.
Srinivasan walked into Federal in August 2010 from Standard Chartered Bank (StanChart), where he helmed its retail franchise. “The board was on the lookout for a person. Egon Zehnder contacted me. And I said, yes. That’s it.” This was a phase when an older vintage of private banks sought to set a new flight path. The Reserve Bank of India (RBI), too, was keen that these banks were brought up to speed. It gave the nod to Srinivasan, and three others who answered to the same profile — Vishwavir Ahuja of RBL (from Bank of America), Murali Natrajan of DCB Bank (StanChart), and P R Somasundaram of Karur Vysya Bank (StanChart-STCI Securities).
Did the money factor bother him? “If it was so, I wouldn’t be doing what I am doing now.” It’s not posturing — he’s given up on bonuses and a sizeable amount in stock options so that his ‘A-team’ can have fatter wallets. An engineer by training, Srinivasan’s first pay-cheque came from Wipro, where he sold computers. Idolising an uncle who was a banker, he joined Citibank, hopped over to StanChart; and later to the 71-year-old Federal. Would he not have been better off professionally if he had continued in the technology space? “Yes, technology is my first love, but then look at its convergence with banking.”
A fire burnt within too: To start afresh, and hopefully, leave a legacy. In foreign banks, “the systems and processes make you what you are. At Federal, I had to do it the other way around.” Federal, like banks in its peer group, had to be reset, be it the people, technology, systems, processes or business orientation, so as to protect its market and be relevant. And all this, even as capital was increasingly quoting at a premium.
It doesn’t particularly bother Srinivasan that the bank is not a pan-India entity as yet. What matters is that the clientele is being served well through its 1,284 branches. “Technology and analytics have changed the way you acquire and service customers. Over the last three years, we have opened only around 15 new branches. Technology is a multiplier. It’s as if you have 3,000 branches,” he says.
As for the financials, the bank’s total business grew by 12 per cent to Rs 2,74,558 crore in 2019-20. Market share in credit improved by 5 basis points (bps) to reach 1.18 per cent, and in deposits by 6 bps to reach 1.09 per cent. Credit grew 11 per cent to Rs 1,22,268 crore, with the retail portfolio up by 19 per cent, followed by 12 per cent in agri-credit and 11 per cent in business banking. Gold loans grew 29 per cent and housing loans by 18 per cent. Corporate and commercial portfolios increased by 7 per cent and 5 per cent, respectively.
The bank posted its highest-ever profit numbers to date in 2019-20 — operating profit grew 16 per cent to Rs 3,205 crore, with net profit up 24 per cent to Rs 1,543 crore. This, in spite of a material increase in provisions to strengthen the balance sheet. While net-interest margin stood at 3.05 per cent, the bank clocked the highest-ever net-interest income at Rs 4,649 crore, up 11 per cent. Gross non-performing assets (NPAs) stood at Rs 3,530.83, or 2.84 per cent (lower than the 2.92 per cent posted in 2018-19). Net-NPAs were Rs 1,607.17 crores, or 1.31 per cent (1.48 per cent). The provision coverage ratio (including technical write-offs) was 72.48 per cent (67.16 per cent).
“I firmly believe that short-term financial performance should not be the focus,” he says, pointing out that as far back 2013-14, the bank had posted a negative growth of about 3 per cent. A closer look at the RBI’s data for this period shows that foreign banks (and the better-run private banks) had decided to slow down book growth, as dud-loans were headed north.
Srinivasan had cut his teeth at foreign banks. Did this inform his decision to go easy on book growth? “Don’t follow the herd. If something looks like a duck, walks like a duck and quacks like a duck, it is a duck. Ignore it. I genuinely believe that these journeys, particularly in large banks, are never a one-man show. But yes, being from a foreign bank may have sub-consciously played a part (to go slow).”
As for not being on bill-boards — and by extension, this being seen as a possible hurdle to capturing a larger mindshare — “it was only two years ago that the bank rolled out its mortgage line, and credit cards are next,” says Srinivasan. What is unsaid is that with two big mass retail products in its suite, Federal’s nationwide recall may well go up. “I started my career (as a banker) in credit cards. But I am launching this business at Federal only now. It’s not just a question of credit cards being unsecured in nature. We wanted to get the analytics part right.”
On the personal front, being fit is a priority. He walks up seven floors every day to his corner room at the bank’s headquarters in Aluva. An avid cricket fan, Srinivasan admired Rahul Dravid for his solidity. These days, it’s Cheteshwar Pujara. Perhaps deep down, he sees himself as a Dravid or a Pujara. It’s a good self-image to nourish. Clearly, for him, solidity is a prized quality in a banker.