Transcript Bancon Report - 24 Frames Digital

‘New Customers: Crossborder Opportunities in
Wholesale Banking’
Bancon Presentation
3rd December, 2010
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India is witnessing a rapidly growing private sector with global aspirations
The transformation
Number of billion dollar companies
(by revenue)
79
4
Some success stories 1
▪
13
▪
27
>US$10 bn
US$5-10 bn
US$2-5 bn
US$1-2 bn
▪
32
1
6
4
35
21
1998
▪
Reliance Communication emerged
on top in a saturated and highly
competitive industry
Current market cap1 at ~ US$ 8.3
Bn
India's largest non-ferrous metals
and mining company & one of the
fastest growing private sector
companies
Sales at US$ 4.6 Bn & market cap1
US$ 6.52 Bn
2008–092
1 Market Cap as on 22 Jun 2010 and Sales as on last reported Financial year end
2 March 2009 Reported results.
SOURCE: Press articles; Prowess; CMIE; Dealogic; Bloomberg; McKinsey analysis
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Credit and trade flows have increased significantly over last few years
ECB volumes
Trade-flow
USD billion
USD billion
474
71
62
63
413
311
41
291
250
252
185
149
2007
08
09
2010
163
183
103
126
2007
08
09
2010
Additional ~40% non-rupee credit
due to foreign subsidiaries of
Indian corporates
SOURCE: RBI, Dealogic, Ministry of Trade
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India – Investment Banking
Cross-border M&A flows is dispersed, however top 5 geographies
contribute to more than 50% of the opportunity
% Share in cross-border
FY ’07 – FY10
deals with India
Share of
deals >10%
Share of
deals 2-10%
$12.9 Bn
$10.7 Bn
3%
US
29%
2%
16% 2%
4%
UK
2%2%
2%
$5.7 Bn
12%
Japan
3%
$2.6 Bn
1%
2%
6% 5%
Singapore,
Malyasia
$2.3 Bn
0.7%
$1.8 Bn
SOURCE: Dealogic
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Overall international banking revenue pool is expected to be more than
USD 9 bn by 2016
India-linked international revenue pool
USD million
9,276
172
928
ECM
M&A
Debt syndication
fees1
Treasury
20
2,530
Trade finance
15
4,069
Credit2
19
640
935
3,415
100
295
298
949
CAGR
(Percent)
56
15
21
68
1,705
FY10
FY16
1 Syndication fees also includes FCCB, bond issuance and structuring fee.
2 Credit includes outstanding non-rupee balances of Indian corporate and their overseas subsidiaries.
SOURCE: FAME database; Dealogic; Ministry of Commerce; RBI; team analysis
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Challenges to Indian banks going global
▪ What kind of coverage models to create?
▪ How do you overcome FCY funding – rating limited to
sovereign rating?
▪ What kind of technology capabilities to create?
▪ What partnership or alliances banks need to build to target
the wholesale opportunity?
▪ How do you manage shortage of talent (expensive talent)?
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A number of global banks have created a separate segment for clients with
cross-border needs
Bank
Segment name
▪
Global bank
▪
Platinum Clients- Large global clients, which mostly operate
cross-border
▪
Asian bank
▪
Global Corporates- Corporates with operations in more than 4
countries
▪
Strategic Clients – Clients with high revenue potential and
complex needs, typically cross-border
▪
Two separate groups of clients
▪
European
bank
– Global Account Management (GAM): ~700 clients served and
managed with one cross-border CST with a global account
manager
– Cross-Border Business Management: Corporate with
activities in multiple markets who don’t require a GAM service
model but certain elements such as coordination/cross-border
credit
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Many global champions have adopted acquisition route - more than
one acquisition every month
Global
companies
Acquisitions over a
10 year period (#)
Asian origin bank
200
225
US bank
258
European bank
European bank
European bank
Key success
factor has been
world-class
M&A capability,
both dealmaking and
integration
110
179
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European bank example: Over a decade, bank rebalanced its portfolio to
become a diversified commercial banking player…
52% CAGR 12 years
Corporate banking
After 12 years – pan European leader
Small Italian player
100% = €34mn
100% = €5,448mn
Investment
banking Italy
Asset
management Italy 16
Private Banking & AM
10
Markets & IB
74
Retail
and SME
Italy
CEE and
Poland
10
34
14
Retail
21
21
Corporate
Diversified commercial
banking player
SOURCE: Broker reports; annual report; team analysis
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…while successfully building an investment banking business in Eastern
Europe
Investment banking
revenues, Eastern Europe
▪
Bank leveraged its local corporate
franchises for investment banking,
partially drawing on global capabilities
▪
Entries in the key markets were
executed through acquisition of existing
platforms (2001-07), e.g.,
>600
>30% p.a.
– Russian bank with corporate franchise,
FX strength
– Russian broker with cash equity and
~100
research focus
– Polish banks with corporate franchise
2000
2007
SOURCE: Reports, company website, press, expert interviews
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Asian bank playing to its strength: Built cross-border wholesale business
on a transaction banking platform
Cross-border products and processes focus almost exclusively
on trade finance and cash management – no special focus on
cross-border delivery of ordinary products
Dedicated cross-border coverage for large corporate and MNCs,
supported by dedicated sales force for trade finance, payments
and cash management solutions
International mid-corporates usually not a separate segment – at
best addressed as a priority customer group
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Questions for discussion?
1● Should Indian banks charter an
acquisition route to achieve its global
aspiration?
2● What capabilities Indian banks need to
build as they “follow their customers”
in the global arena?
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Thank You
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