Anz Grindlays Vault For Growth

The sign on Mehli Mistris door at ANZ Grindlays India headquarters at MG Road, Mumbai reads: managing director. Two months ago it read: chief executive officer.

For the 114 - year-old, Rs 1,115-crore foreign banking behemoth, the suave Mistris new designation marks the start of a radical and complex restructuring. The aim: to double profit in five years.

The exercise, which involves an intricate new reporting system, described as the matrix system, a regrouping of businesses, a Rs 85-crore splurge on technology and possible new joint ventures, began a few months ago.

It is clear that this bank, which has been marked for its conservatism in the past, is now in a tearing hurry. In January, it appointed consultancy firm KPMG Barents, the US-based financial services specialist arm of KPMG Peat Marwick, to suggest ways of making its new structure sustainable. The consultants have been given just two weeks to submit their report.

 

Partly an offshoot of a year-old global exercise, which saw ANZ Grindlays worldwide headquarters shift out of the UK to Melbourne, Australia, ANZ Indias restructuring programme is especially important to the $ 12 billion banking conglomerate. India is the banking corporations third largest operation (Australia leads with $6,534 million and New Zealand with $2,020 million.). With business worth $ 286 million, Indian outfit is much behind its forerunners, yet India is important to the banks global parent because of the potential it has.

For us, reorganisation is only a vehicle to more productivity and more business, says Mistri, who shifted in 1996 to ANZ Grindlays from Citibank where he was in charge of the Saudi operations.

ANZ Grindlays India could certainly do with more of both. Although the bank is one of the largest profit-earners among foreign banks, it is by no means among the top performers in terms of efficiency.

In 1996-97, its business per employee was Rs 28.48 lakh. Compare this with Bank of America, which shares top honours with ANZ in terms of profits, at Rs 118.35 lakh. In terms of operating profit per employee, ANZ at Rs 5.06 lakh in 1996-97 trailed behind Bank of America at Rs 41.93 lakh.

Then again, in terms of return on assets, ANZ emerges a laggard at 1.12 per cent. Compare this with ABN Amro (2.16 per cent), Bank of America (2.16 per cent), Deutsche Bank (2.49 per cent) and ING Bank (3.17 per cent).

Key to ANZs new organisational blueprint is a regrouping of businesses into five divisions: retail banking, corporate and business banking, investment banking, asset-finance banking and funds management.

This marks a shift from this ageing banks earlier structure. The difference between the old structure and the new one is twofold. One, the bank has regrouped the activities in five major areas from the earlier three -- retail banking, investment and treasury, and corporate banking. Funds management and asset financing, which were not among the banks major priorities till now and were part of the existing divisions, are being upgraded in the new structure, so that the bank will now have five key divisions associated with five key activities.

There is also a change in the reporting system. Each of the five senior heads will now report to the global head of the respective activity, in addition to the local managing director. This matrix structure is expected to yield three distinct advantages: more synergy betw-een the Indian and the global operations, better product transfer pro-cess and a larger platform.

But in addition to all this is the creation of a post of a chief operating officer (COO) who will be reporting to the local managing director and will be responsible mainly for a large number of areas: support functions like technology, risk management, finance and compliance, human resources, profits, audit and legal.

Too much to handle for one person? Yes, and that is why we will have a very senior and competent person for that post, Mistri counters.

The reorganisation indicates the banks future priorities, says Mistri and hints at many new initiatives within each division. The retail banking division, for instance, will be stepping into automated teller machines and home loans, sectors where it has shown slow progress so far.

The introduction of these high-value retail products is to be accompanied by an elaborate restructuring of the branch network. ANZ Grindlays has 57 branches in 14 cities in India, which is roughly a third of the total number of foreign bank branches operating here, says Mistri.

This he points out could be as much a disadvantage as an advantage, mainly because of the banks historical baggage. ANZ Grindlays was formed in 1984 when ANZ Bank and Grindlays Bank merged. But Grindlays itself is a 150-year old bank which merged with the National Bank of India and Lloyds Bank of the UK. Many of the branches that the merged banks acquired are located close to each other. This has meant that the costs involved in running such branches often did not justify the business they generated. Many of these could now be relocated.

The exercise could be tricky for two reasons. One, the move would require permission from the Reserve Bank of India (RBI). Second, the management would have to tackle the banks two powerful unions.

Mistri thinks there is no debate. We will request the RBI to allow us to relocate some of the branches, and talk to the unions. If neither allows us to do that, we will have no option but to close these branches, he says, adding, Our purpose is to have cost-effective service.

Like in many other banks in India, ANZ Grindlays too suffers from some degree of overstaffing. At the end of March 1997, its staff strength was 3,914 as compared with 464 in the case of American Express and 564 for Bank of America.

This point, in fact, forms a major part of KPMG Barentss brief. Mistri is cautious. We need to cut fat, not bones, he avers. And though there is no voluntary retirement scheme immediately planned, he suggests that staff restructuring can be expected.

The focus on costs is crucial because ANZ plans to spend Rs 85 crore on a substantial technology boost. The agenda includes introducing VSAT and video-conferencing facilities for its customers, strengthening the MIS and customer service activities.

All this is just part of the splurge. Between April and November, we will acquire a technology platform that will totally revolutionise banking in India, Mistri promises.

High-value retail banking, however, can hardly be a major profit contributor. But it is an important way for any bank to attract high net worth individuals who could also bring big corporate business its way. So the investment banking division is also coming in for a major overhaul.

Investment banking, which will come under the managing directors direct charge, is being regrouped into four sub-divisions. The market division is to oversee the forex and capital markets, the projects division for structured products. A relationship management division is coming up to deal with corporate clients. The fourth sub-division is ANZ Securities will deal with debts trade.

Another focus area for the bank will be the asset finance business. Here, the bank is aiming to tap the middle level market like leasing, stockbroking, cash management and custodial services.

The major vehicle for these activities will be Esanda Finanz, a finance company in which the bank currently hold 51 per cent of the equity, the rest being held by high-net worth individuals and the staff of the bank. ANZ Grindlays now plans to raise its holding to 75 per cent. Currently, the company is mainly in car finance business, with a turnover in 1996-97 of Rs 80 crore.

The profit target that ANZ Grindlays has set itself would translate into a compounded annual growth rate of 15 to 20 per cent. Interestingly, the profit growth of the bank in 1995-96 was a minus 24 per cent, followed by a positive growth of 60 per cent in 1996-97.

Mistri certainly has a tough task. And it is unlikely to be made easier by the six-year-old Rs 900-crore case with the National Housing Bank, a fallout of the Harshad Mehta scam, which is now before the Supreme Court.

Mistri of course feels his bank has a strong case, but what happens if that confidence is not borne out? Well, I cannot say that we are not concerned. But it is not as if the Indian operations will close down if we ultimately have to pay up. We are in a growth mould and will take it in our stride, he says.