The Hindu Business Line : ICICI Bank sees gains from low-cost overseas retail deposits

The bank has access to $8-10 b low cost overseas funds, and the pipeline of outbound M&A deals of Indian corporates would be anywhere between $15-20 b — Mr Sonjoy Chatterjee, Executive Director, ICICI Bank

Mr Sonjoy Chatterjee, Executive Director, ICICI Bank

Priya Nair
Radhika Menon

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Mumbai, May 26 Mr Sonjoy Chatterjee, Executive Director, ICICI Bank, is responsible for Corporate and Investment Banking, Government Banking and International Banking businesses of the bank. Prior to this, he was Managing Director and CEO of ICICI Bank UK Plc. He was responsible for the bank’s North American, European and CIS operations.

In an interview with Business Line, Mr Chatterjee explains how the bank’s strategy of setting up full fledged branches overseas and actively tapping the local overseas population, in addition to NRIs and Indian corporates, has proved beneficial in terms of raising funds, given the global credit squeeze.

The bank has access to $8-10 billion of low cost overseas funds, thanks to the retail deposits from its overseas operations. Mr Chatterjee also said that the pipeline of outbound M&A deals of Indian corporates would be anywhere between $15-20 billion, despite the global slowdown.

How do you see the role of international and corporate banking in ICICI Bank shaping up, given that the bank was concentrating on the retail segment till not very recently?

The two are closely linked. When we started off international, it was for two clear reasons. One is we saw our clients going outside — both retail and corporate. Our clear aspiration is that we want to be called a community bank for Indians, wherever we are. UK has 13 million Indians. Out of this, 2-lakh bank with us. Some have full fledged banking relationships with us. Some basically do remittances and some have strong NRE (accounts in India) relationship with us. Across these three sets of products we offer, we would safely be the largest bank for Indians in the UK.

The same applies to Canada and wherever we have local banking licence. In the US also this will be our principal focus. In the US we can’t do local banking except for the HI-B visa holders. We will obviously focus heavily on this expatriate Indian population. The same thing holds true for the Gulf. The second link of our strategy was the corporate business. Particularly in the last year there was a huge drive on overseas expansion and M&A deals. In the last one-and-a-half to two years the whole scale of transactions changed. We saw deals in excess of $1 billion.

On funding...

Earlier, we had access to a whole host of funding options. While some of the wholesale opportunities have become a little limited, because of some of the global credit squeeze, we have substantially stepped up our local retail deposits. UK, Canada and Germany have very successful online funding products, called HiSave. Almost 90 per cent of the customer segment that comes into this product is the White Anglo Saxon. UK, Canada put together, we have roughly $8-10 billion flowing in. That has become a complement for the bank’s foreign currency requirements at a time when the wholesale markets are getting tighter.

Syndication...

This has been a key success factor in our overseas banking. We have set up successful syndication desks in London, Singapore, Dubai and now one in New York. These syndication desks have increased substantially the number of banks who are willing to hold Indian paper. The overall networth of the bank is substantial, both in India and in our UK and Canada subsidiaries. In India our networth is somewhere around Rs 50,000 crore. So we have the ability to underwrite large transactions. Our strategy is a strong M&A desk, complement of wholesale lines and $10-billion of retail low cost borrowings, syndication and the power of our balance sheet. We are still carrying on the same strategy.

Retail deposit growth has been substantial? Do you see that sustaining?

It has continued unabated. We get 200-300 applications every day. That’s how strong the product, HiSave, is. And we are a full fledged bank. We offer full local deposits insurance. More than that, it is the trust we have built up. We opened our branch in Germany on February 28. Within two months we have $250 million of retail deposits in a country that has 50,000 Indians. For the first time we are getting into a big retail push in a country that does not speak English. We spent a lot of time and effort in getting things right. The customers are not Indians. These steps that we took some months back are today precious within the tight dollar liquidity situation.

How will the global slowdown impact Indian corporates looking at acquiring companies overseas?

From an opportunity point of view, I would say it is easier. The only limiting factor can be that foreign currency money that was easily available nine months back is no longer easily available. You are really dealing with certain limitations in funding money. Having said that, all the corporates that we have relationships with have done transactions. But if I were sitting in their shoes doing a transaction, this would be an additional concern that I would build into my thought process. The transaction has to be fairly rational, fairly well designed, which is good for the corporates and good for the bank. Any aggressive calls would be difficult to take through in this kind of a market. But I have not seen a slowdown. We are sitting on a huge a pipeline of outbound M&A transactions. The aggregate capacity would be anywhere between $15-20 billion.

What is the status of your Singapore operations?

We are in dialogue with the regulators. Singapore continues to be our biggest offshore branch. The only additional thing the licence allows to do is retail operations. We need to understand fully for ourselves what this means. This may allow us to raise retail money. But there could be restrictions on where we can use that money, what proportion I need to keep in Singapore. This is not something we want to jump in.

Which other geographies are you looking to expand?

We need to mine deeper into our existing markets. The only interesting market for us is China. We are there in Hong Kong. But we should deepen our presence in mainland China. We have an office in Shanghai. I see much bigger trade opportunities and we would like to upgrade that to a branch. US is a great market. We can do everything on the wholesale market. Lot of NRIs in the northern part of US have cross border linkages with India and we need to explore that further.

Do you see share of foreign operations to total business growing?

Share of foreign operations to total business is 25 per cent and is a healthy proportion to work on. Overall components within that, Indian corporate M&A and remittances, will sustain. Given that the bank is also growing, the proportions may remain the same. I am not fixing any yardsticks.

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