Niall S.K. Booker, CEO (India), HSBC: Chasing growth, aggressively

Niall S. K. Booker, 46, isn't impressed by the idea of posing with a golf club for a BT photograph. His "no" is rather firm, and accompanied by a smirk. Perhaps the golf club brings back memories of the old boys' club. And that's precisely the image the Group General Manager and Chief Executive Officer, India, of The Hongkong and Shanghai Banking Corporation (HSBC) has been trying to shed since he took over the reins in November 2002.

Till not too long ago, the HSBC culture was bureaucratic and clubby. Those at the top thrived in complacency, and playing golf was perhaps more of a priority thanintroducing new products and services. Booker has succeeded in consigning that unenviable legacy to the history books. Golf is out (despite it being Booker's favourite game; the customer is in.

At the core of Booker's new HSBC is the revamped work ethic. Employees, in his own words, "are sitting at the edge of their seats. And I must say they have done remarkably well in adapting themselves." Promotions and increments today are based on performance (rather than age and experience), and employees are encouraged to be market-driven.

Booker's restructuring exercise has already begun to get reflected in the performance of the bank (see The Pay-back). The 2003-04 results will be out some time next month, but Booker reveals that key indicators like assets per employee, net income and operating profit have increased in the region of 30 per cent. Despite being a late entrant in the home loans and asset management businesses, both are booming today. The only grey blotch in an otherwise bright picture is HSBC's deal with the Commonwealth Development Corporation, now known as Actis, to acquire a 20 per cent stake in UTI Bank for Rs 418 crore.

Customer Is King

Soon after taking charge, Booker dived head on into the heart of HSBC's woes: He shuffled the top deck. Non-performers have been offered retirement packages, and new faces, some with non-banking backgrounds-like Sangita Pendurkar from Hindustan Lever-have been brought in. Performers have been promoted to take charge of key departments. Result? "The culture at HSBC has become more sales-oriented, market- and performance-driven," says Booker. Adds Rajnish Bahl, Head of Personal Banking, Western India. "We are aligning all our products and services to what the customer wants." A strong customer relations team follows up leads pertaining to products like wealth management, home loans, credit cards and commercial banking. In fact, even the teller at a branch is supposed to get customers for these products. Last year, HSBC's home loans business grew by 100 per cent. And the branches' contribution to that, according to Bahl, is as high as 25-30 per cent.

Unlike before, HSBC now has some women at the top and Booker is extremely happy with their performance. Pendurkar, who heads marketing, is one of them. For instance, her "Smart Home Loan" campaign is one of the reasons why HSBC's home loans business doubled last year. Then there's experienced deal maker Naina Lal Kidwai, who joined HSBC in August 2002 and was instrumental in working out the UTI deal. "These women have brought a different management style into HSBC," feels Booker.

Since March, HSBC's corporate banking division has been split into two: Corporate and investment banking and markets (CIBM); and commercial banking, which is building businesses with small and medium term enterprises (SME and NMEs).

P.J. Nayak, CMD, UTI Bank

HSBC has plenty to gain if it acquires UTI Bank, as it can strengthen its presence in such areas as credit cards and payment systems

"That latter is a new and important focus area for us," says Subir Mehra, Head of Commercial Banking. The CIBM business consists of large global and Indian corporates and HSBC's focus for the SME and MME business would be to look for distributors and suppliers to these large firms. "We will leverage the CIBM relationship to grow this business and fulfill the borrowing needs of these small companies," adds Mehra. The SME and MME business is more widespread and offers a higher return.

Asset management has been a success. Launched in December 2002, HSBC today has total assets under management in excess of Rs 5,400 crore, making it the tenth largest AMC in the country. Despite such rapid growth, HSBC continues to be a smaller player in most of its businesses when compared with the likes of HDFC Bank, ICICI Bank, Citibank and Stanchart. In the long term, Booker would like to have a 10 per cent share in the markets in which HSBC operates. And he plans to achieve that through organic growth alone, without UTI Bank, which is only "a financial investment," according to Booker.

If that sounds tough to believe, it's because HSBC has plenty to gain if it acquires UTI Bank, as it can strengthen its presence in such areas as credit cards and payment systems. In December last, when the HSBC CEO-designate Michael Smith, on his visit to India, announced that HSBC would buy a 20 per cent stake in UTI Bank from CDC, it was touted as the smartest move the lagging foreign bank had made in India. After all, UTI Bank has a branch network in excess of 215 branches, and its post-tax profits have grown by 50 per cent in the last four years. Much of that has come from healthy fee income. For HSBC, this was the easiest way of expanding in the Indian market.

But five months on, the RBI is yet to give the deal its nod. The reason for the delay, according to analysts, stems from the fact that the regulator is still working on norms for FDI in the banking sector, as stipulated in the Union Budget 2003. According to Hemendra Hazari, Senior Vice President, ASK Raymond James, "The RBI has to put in place its policy on FDI in banking. Before it does that, it may not find it easy to allow HSBC to buy a 20 per cent stake in UTI Bank."

A press note, dated March 5, 2004, issued by the Union Ministry of Commerce and Industry (Department of Industrial Policy and Promotion) says that foreign banks will be permitted to either have branches or subsidiaries. Not both. According to sources in the banking sector, the regulator will have to weave its decision on HSBC with the new policy on foreign banks' acquisitions in India. As per the press note, a 74 per cent foreign holding (FDI plus FII) in Indian private banks will be allowed (although creeping acquisition may not be permitted). According to an RBI official, the regulator had sent a draft on norms for subsidiaries of foreign banks around two months back. "It was more of a discussion note. And we have not heard of any action being taken on it yet," adds the official. However, with a Left-supported new government at the helm, the prospects of FDI in the banking sector have dimmed considerably. Donald Peck, Managing Partner, South Asia, Actis, though, is still upbeat. "We are awaiting RBI's approval, and we expect it will come through," he says.

Booker, for his part, is not willing to speak much on UTI Bank. "I have always maintained it's of primary importance to have organic growth. Anything else is opportunistic. We have a strategy for organic growth in place." Analysts, though, aren't underestimating the possibility of foreign banks being allowed to acquire their Indian counterparts. After all, UTI Bank isn't the only one that's up for grabs. They point out that a number of banks like Bank of Punjab, Federal Bank, Global Trust Bank, IndusInd Bank, Karnataka Bank, Laxmi Vilas Bank and South India Bank are attractive targets for foreign banks like Citi, ABN-Amro, Stanchart and American Express. And perhaps also HSBC. For Booker, though, one thing is clear: HSBC means business, and it's going to aggressively chase growth. With or without UTI Bank.