HSBC's Niall S.K. Booker: In a little over a year, he has got HSBC moving double quick

In the last six months, Niall S.K. Booker has seen his golf handicap slip from an envious six to nine. In the rarified world of corporate golf addicts, that's a catastrophe of no small order. But luckily for Booker, CEO of HSBC India, the time off the greens has been more than well spent. In those 180 days, the 45-year-old Booker has worked hard to turn a chance, mid-air encounter between HSBC Holdings' former group CEO and a senior executive at CDC Capital Partners into a Rs 306-crore deal, picking up 14.7 per cent stake in UTI Bank, one of the first private banks to set up shop after the sector was opened up in 1993.

The unexpected move has got industry talking. For one, at least five other foreign banks-including Citibank and ABN Amro, among others-were in the running for UTI Bank, and few expected HSBC, long considered an ultra-conservative British bank, to walk away with the deal. For another, it could set off a string of other acquisitions in the industry, given that there are some eight banks (See Banks In Play) that look ripe for the picking.

But there might be some waiting to do. At the moment, banking regulations do not aid takeover by foreign banks. The foreign direct investment in private banks is limited at 49 per cent and there's a 10 per cent cap on voting rights irrespective of the stake. Possibly that's why HSBC is describing its investment in UTI Bank as a financial investment. "It's a foot in the door, as we have done in the case of Bank of Shanghai in China," says Booker.

But you don't invest Rs 300 crore just because you feel like it. Obviously, HSBC has its eye on the future. The FDI limit is likely to be raised to 74 per cent and the voting rights made proportionate to shares held. Once that happens, bank valuations could go up. As of now, HSBC has the option of acquiring CDC's remaining 5.3 per cent stake for Rs 112 crore over the next three months. It has also announced an open offer to acquire another 20 per cent in UTI Bank at Rs 90 a share, although the stock had hit Rs 120 when BT went to press.

What is it about UTI Bank (No. 23 on this year's BT-KPMG survey of Best Banks) that HSBC finds so attractive? Take a look: The bank has more than Rs 16,000 crore in deposits, 212 branches, and 1,100 ATMs. Its non performing assets as a percentage of net advances is 2.3 per cent, much lower than the industry average of 4.5 per cent, and operating profit per employee at Rs 18 lakh is the sixth highest in the industry (HSBC comes two notches below). In terms of their business portfolios, HSBC and UTI Bank seem complementary. For example, in cases where HSBC has reached the single borrower limit, UTI can step in as a lender. In the small and medium enterprises segment, HSBC can help UTI Bank with treasury skills. Says P.J. Nayak, Chairman and Managing Director, UTI Bank: "CDC's presence on the board helped us in sharpening our strategies. I am sure HSBC would also bring such expertise to the table."

"CDC'S presence on the board has helped us in sharpening our strategies. I am sure that HSBC would also bring such expertise to the table" P.J. Nayak, Chairman and Managing Director, UTI Bank

Shaking 'Em Up

For HSBC, the deal has brought another intangible benefit. Suddenly, nobody thinks HSBC, which has been in the country for an incredible 150 years, is as sleepy as they thought it to be. A big part of the credit goes to Booker himself. On November 15 last year, Booker took over from Zarir J. Cama as the India CEO and set about shaking things up at the bank almost immediately. In January this year, he made presentations to the bank employees-teller upwards-at all the 16 cities where it is present. In all these presentations, he compared HSBC's performance with that of rivals like Standard Chartered and Citibank. He must have had a lot to say. For example, while HSBC was among the first few to offer credit cards in India, today it has only 6.5 lakh cards issued compared to Citibank's 20 lakh and Standard Chartered's 18 lakh. In home loans, HSBC is way behind ICICI or Standard Chartered. It's also much weaker in the retail business. Says Booker: "We wouldn't necessarily want to be the biggest, but we would like to be one where in our chosen segments (like credit cards and SMEs) customers prefer us over others."

Just the same, Booker (he's an avid reader of management books and took inspiration from Jim Collin's Good to Great book for the transformation at HSBC), is bringing fresh talent into the bank. In December 2003, HLL's brand manager for Fair & Lovely, Sangita Pendurkar, joined HSBC as head of marketing. Earlier in August last year, Naina Lal Kidwai had arrived from JM Morgan Stanley as Vice Chairman and MD of HSBC Securities and Capital Markets. While Pendurkar has been entrusted with the task of building HSBC's retail business, Kidwai may have already delivered. It was she who, alongside Booker, negotiated the deal with CDC.

Despite UTI Bank, HSBC has some way to go in retail banking. Booker knows that only too well. In the last one month alone, he has moved 180 people from operations to sales and other frontline jobs. The idea: gear up for a retail push in 2004. The UTI deal, therefore, may not be the only one HSBC makes. In fact, industry analysts expect it to acquire two more smaller banks and consolidate all three into a sizeable entity. The bank's worldwide CEO-designate Michael P.R. Smith denies that HSBC has any "shopping list for India", but Booker has his eyes peeled. "We certainly wouldn't say (UTI Bank) has filled our boots," he says.

Whether HSBC makes its moves in banking or even insurance (as Smith hinted to BT), one thing is for sure. The bank's rivals will now think twice before dismissing it as sleepy and conservative.