The paintings are all around us – Jehangir Sabavala, M F Husain, Vasudev S Gaitonde, and Chittrovanu Mazumdar – jostling for space with a wide range of exquisite miniature paintings. “When we get bored at meetings, they are like an oasis,” quips a Citi India executive who takes us on a tour of the bank’s headquarters at the Bandra Kurla Complex. Citi moved into this building nine months ago and Pramit Jhaveri was keen that we take a look at the new office on our way to Botticino, the Italian specialty restaurant at the Trident, which is within walking distance.
The highlight of the swanky office is, of course, the 200-odd artworks that find pride of place across four floors. As we settle down at the restaurant 15 minutes later, the 51-year-old CEO talks about them in great detail: how they have been collected by the bank over the last 50 years and were lying in branches, godowns and basements. His favourite painting is the Gaitonde, one of which was discovered at a colleague’s office outside Mumbai. Asked whether he knows the painter, the colleague had asked a counter-question — “What’s that?”
Not surprisingly, the painting had a huge string of fungus around it. So, Jhaveri decided to get every single work to Mumbai where they were restored, valued and insured.
Art seems to be Jhaveri’s only non-bank activity; he watches movies only on the wing and has given up being an avid reader. Jhaveri credits this passion for art to his wife Mukeeta. The couple have been collecting art for nearly 25 years now. Going by the yield on investment in art, it must be a perfect case of mixing business with pleasure, we suggest. Jhaveri tries to deflect the point by saying both he and his wife love to collect art, and if the value of their collection appreciates along the way, it’s only a bonus.
The answer, which stymies our plans to discover the kind of returns the couple have made on their investment in art, does full justice to Jhaveri’s reputation of a banker who firmly believes in the theory that “loose lips sink ships”. “In our business, by definition of what we do and by design, you become privy to information that is incredibly confidential. It would be a breach of faith if you talk about that to anybody,” he adds.
The steward has been waiting anxiously for our order, but Jhaveri skips starters and opts for penne pasta (he is a vegetarian only at lunch time on weekdays). He chose banking because he said that was a profession most 20-year-olds found very appealing and glamorous. A campus recruit from the Simon School of Business, Jhaveri must have found his first employer, Citi, very appealing indeed. Twenty-seven years on, he remains with the bank, that too in India throughout.
In keeping with his “sealed lips” mantra, Jhaveri plays down the role of investment bankers (he was heading that division before he became CEO) in marquee mergers and acquisition (M&A) deals. “We would be fooling ourselves if we believe we play a stellar role in these deals. Our role is that of a facilitator only,” he says. Such answers, which give nothing away, can break journalists’ hearts, but India Inc’s leading lights, many of whom are his clients, would be very pleased.
Like many of his counterparts in Indian companies, Jhaveri is impressed with what he has seen of the new government so far and advises against sitting in judgement every Monday morning. His corporate clients know that there is no magic wand and would be happy with fewer quick fixes and more sustainable outcomes. “You have to be practical. Iraq, its impact on oil prices and the delayed monsoon were not factors a month ago. But there is an extraordinary sense of optimism,” he says. For example, the equity markets are very clearly factoring in this optimism, which has led to several companies across various segments taking advantage of market conditions to raise equity. He is also expecting a pick-up in cross-border M&As.
Jhaveri orders coffee and talks about the transition banks have made in the last decade. The industry, he says, lost its way in the early 2000s and forgot that the role of banks is to enable economic progress. The result is that the industry will remain highly regulated in the foreseeable future. “You can argue that the pendulum has swung too far, but the counter-argument for that is that the industry has no one else to blame but itself. There is also another view which suggests that too much regulation may have implications for innovation in the industry, which it quite clearly needs at this point,” he says.
That gives us an opportunity to talk about the problems that Citi India’s retail business faced around 2009. Jhaveri, who took over as CEO in 2010, says the crisis was “self-inflicted” and had nothing to do with regulations or the global crisis. The lesson Citi India has learnt is responsible finance, which means that the quest for market share and growth can’t be at the cost of compromising on the traditional origination and underwriting standards. “We couldn’t afford to carry a lot of deadweight. So, the first step for us was to clean it up. The second step was to restructure and transform the old business model which clearly didn’t work,” he says.
The bedrock of the new model was the realisation that with 42 branches in a country that has some 105,000 branches, it would be very naïve for Citi to try and compete with someone who has 3,000 or 4,000 branches. So the new business model is one that combines Citi’s value proposition in India with its global platform with what its clients would like it to do. And on that, the bank had to superimpose what it is allowed to do in India by the regulator. “Sadly, we had deviated from these very basics in the past and the end result spoke for itself,” he says.
Citi’s global consumer retail strategy is to be in the top 150 cities in the world and nine of those are in India. But Citi India is already present in the top 14 to 15 cities in India. Successful implementation of the turnaround strategy has yielded results, with profitability and growth coming back to the consumer business. What Citi does must be appealing to a lot of people as the bank’s market share, he says, is much higher than its physical presence across the spectrum. That’s also because there are things happening in India that lend to the bank’s strengths. Take, for example, the rapid digitisation of money and urbanisation.
He proceeds to give the example of the growth in the credit cards business. India has almost a billion cell phone users and over 200 internet connections, and all of them are potential clients. Around 70 per cent of Citi’s clients choose to bank electronically, which is much above the industry average. There’s more. Citi has outstanding credit cards of 2.3 million, while the number of credit cards of the top two players in the country is around eight million. But in terms of card spends, Citi is at 17 per cent, which is better than industry average.
The biggest facilitator has, of course, been technology and Jhaveri says “smart branches” are the way to go since they provide tremendous advantages in terms of costs, productivity and efficiency. That, he says, is an example of how technology can be used to initiate a relationship, to do transactions or even for human interface. The bank is now looking at converting more of its existing branches into the smart-branch format and also looking at opening new smart branches.
Wouldn’t life for Citi India be simpler if it had accepted the regulator’s proposal for converting it into a wholly-owned subsidiary? Jhaveri chooses his words carefully and says: “There is no finality in a decision of this importance. All we have said is that the way the regulations currently are, conversion to a subsidiary would result in the costs outweighing the benefits quite significantly and also equally importantly, having a disruptive impact on many of our client segments”.
We ask our final question: it must be tough to be a foreign banker in India. Jhaveri says “it can be,” but Citi thinks it is very Indian and always conducts itself in a manner that is as local as anyone else. “You can look at the glass half empty or half full; we look at it as half full,” he says. The answer shows why Citi is in no danger of loose lips sinking ships under this CEO.