Deutsche Bank's Gunit Chadha: Small, but profitable

While other bank CEOs jostle with each other for a piece of the retail consumer's wallet, Gunit Chadha prefers to watch the brawl from afar, his pin-stripe suit spotlessly clean. That, of course, is an imagery, but an accurate description of 43-year-old Chadha's position in the industry. Roped in by the German bank in August last year from idbi Bank, Chadha has been given an unequivocal mandate: grow the bank's corporate and investment banking franchise in India. Which is why Chadha, who came to idbi via Citibank, is unfazed at the bank's size: it has a little over Rs 8,600 crore in assets, operates a mere five branches, and employs only 500 people in the country. "We are in such a sweet spot of the economy where plenty of opportunities are looking through the window," says Chadha.

It's hard to disagree with the Managing Director and CEO of India's best bank in the small bank category. While its net sales last year were just Rs 892 crore, it raked in gross profits of Rs 714 crore (that's no typo). Net of taxes, interest and depreciation, it still walked away with 28.55 per cent in profit margins or Rs 273 crore. Chadha says that he's confident of a 30 per cent year-on-year growth in the top-line at least for the next few years. "And we don't need to open new branches or spend on advertising to scale up. Our aggression will show in the value we deliver to our demanding clients and the business we do," he says.

Heave-Ho

At present, the bank has two broad businesses. One includes global banking and capital market services, where it offers everything from trade finance to custodial services to broking to M&A advisory. Recently, it developed a cash management solution for Castrol India to help streamline its treasury management, improve cost efficiencies and credit control. The results were quick in the coming: Castrol freed up nearly Rs 10 crore in working capital.

That apart, Chadha points out, "a significant proportion of book-run deals in the country are led by Deutsche Bank." Recent examples include a Rs 1,000-crore five-year bond issue for HDFC and Exim Bank's $250-million (Rs 1,100-crore) bond. The bank also advised in Reliance Infocomm's acquisition of Flag Telecom, and AT&T's sale of its stake in Idea Cellular. In equity broking, it controls 10 per cent of the total FII inflows into the country, while in the custodial business it has a 30 per cent share. Over the past year, Chadha has beefed up his corporate banking team. He's brought in Narendra Nagpal from WI Carr securities to be product head of global equities; Sanjay Agarwal from Kotak Group to manage global corporate finance; and Rahul Raisurana, formerly a Moody Investor services hand, to take charge of credit risk management. Their brief is to help clients take advantage of the Frankfurt-based DB's range of offerings.

The second, and more recent, line of business is asset management and private wealth management. The latter, launched in January 2003, already has assets worth Rs 2,500 crore under management, but Chadha wants to broaden its scope. At present, the clients comprise institutional investors and the portfolio is debt-oriented. The plan now is to tap retail audiences for the asset management business.

But the ambition here may be significantly bigger than it looks. Recently, the parent infused Rs 419 crore in capital and allowed Chadha to develop a holding structure for the bank's loosely-run businesses in the country. The idea, as being reported in the German press, is to create a channel through which the parent can invest money to boost its private banking business, either organically or through acquisitions, now that RBI has allowed foreign institutions to enter this segment.

It's easy to see why India appeals to db. With an estimated $109 billion (Rs 4,79,600 crore) in private banking assets, the country offers plenty of growth opportunities for a bank that aspires to be a global leader in wealth management. Besides, none of the local banks can match DB's expertise or offerings in the area. It will, however, face competition from foreign banks.

Meanwhile, the bank last year set up two BPO centres in India (in Mumbai and Bangalore) to process trade transactions originating in Asian countries, and global cash operations and electronic payments. The equities BPO, based in Mumbai, will provide equity sales, execution and research services to select local institutions, international fund managers and investors. "The parent is fully committed to India in terms of resources, credit and support," says Chadha.

After all, there aren't too many markets where you can be small and make over-sized profits.