Everybody wants a fair dealing irrespective of which country they hail from. So as is the principle of ICICI Bank’s overseas retail strategy. For example the bank’s on-line savings account High Save in the UK, this is seeing over 600 registrations daily. Originally targeted at People Of Indian Origin (PIO) in the UK, the product has, ironically, attracted more non-PIOs as customers.
The secret behind this is the outsourcing all back-office work which has helped the bank to offer a higher yield on High-Save , which is basically an internet-based savings account. “Given that we have a great back-end processing unit back home in India, we try and outsource all back-office work related to retail banking to India. ICICI Bank UK PLC has a costto-income ratio of less than 25%, much lower than any other British bank” says Sanjoy Chatterjee, executive director, ICICI Bank.
Apart from retail customers, the bank has looked upon the self-employed professional in the UK as its potential customer. These are individuals who are owning businesses having a turnover ranging from £1 - 5 million. Chatterjee told that in the last one year, many of these clients in UK have approached the bank with transaction banking needs as well.
These clients come up for foreign exchange related products or lines of credit, something of which the traditional banks of a British origin do not take much interest.
While in Rome, do as the Romans do. ICICI looks like to be following this proverb to the maximum extent. While the bank is aiming at diamond units in Antwerp, the nouveau riche of Singapore are being taught better ways to manage their wealth. Corporates in Canada are also being looked upon as potential clientele, while Indians working in the Middle East are potential clients of the remittance segment.
ICICI’s international banking business is mainly driven by three forces: NRI remittances, putting core competencies to better use and corporate and investment banking services. The latter power overseas gaining of Indian corporates . These are the businesses which fill up ICICI’s fee income pool, by bringing in fees for advisory services, funding client needs and offering derivative products like interest rate swap.
Banks getting into new markets overseas have to put up a good performance. There are so many opportunity waiting for them, while, at the same time, the industry is highly controlled with multitude regulations that stand between overseas banks and their potential customers. How is it possible for a bank to make it and its potential customers feel at home and find its ground in a hitherto-unknown land? One can be by setting up a strong workforce, which includes a judicious mix of locals and expatriates. The other way is to zero in on the niche areas in the initial phase and then branch off into other regular activities.
ICICI saw an international banking as a key opportunity in 2001. The main aim was to look into the needs of the offshore client. In 2002, the bank set up the International Banking Group (IBG) to implement a focused strategy for its international banking business. Today, it is having a strong position in about 18 countries in the form of wholly owned subsidiaries offshore banking units, representative offices and full-fledged branches.
In the past five years, it has set up subordinates in the UK, Canada and Russia; offshore banking units in Singapore and Bahrain (have received a full fledged banking licence now) ; branches in Dubai, Sri Lanka, Hong Kong, Qatar and ICICI UK PLC branches in Belgium; and representative offices in the US, China, UAE, Bangladesh, South Africa, Indonesia, Thailand and Malaysia.
So how much does the bank gathers in the form of revenues from its global banking operations? The bank’s international operations as on September 30, 2007, accounted for about 22% of its consolidated banking assets, while in absolute terms, assets from international banking account for Rs 88,000 crore. The bank’s remittance business amounts were about Rs 8,600 crore during the second quarter of 2008. ICICI Bank UK’s profit was $ 36 million after tax for the six-month period ended September 30, 2007 (H1-2008).
ICICI is not the only one in this race to set up shop in offshore markets. The country’s largest public sector player, the State Bank of India, others like Bank of India and Bank of Baroda, too are interested in having a strong overseas presence. In the UK, Bank of India, Bank of Baroda and Canara Bank too have begun operations.
SBI has foreign banking subordinates in Mauritius, Canada, California and Moscow, while Bank of Baroda has a presence in countries such as China, Tanzania, Botswana, Malaysia and South Africa. Bank of Baroda is now looking at fresh opportunities in Canada, New Zealand, Qatar and Kuwait. Bank of India has set up presence in France, Singapore, Kenya, Japan and Belgium.
In UK, ICICI has managed to grab upon a large number of NRI clientele, the idea behind it was to open branches in places such as Wembley and Southall which boast of a very high degree of civilization, a term used to refer to Indian populace abroad. While these customers may step into ICICI branches with an aim of depositing some cash into their accounts, the trick is to draw them into other offerings as well, which includes facilities such as overdrafts, cards (credit and debit) and internet banking.
Even though the broad plan is more or less centered around these three key drivers, the bank prefers to approach a new market through tailor-made solutions , specific to each market.
“While a greater degree of penetration is achieved, we could even explore other opportunities such as consumer credit in markets abroad,” says Chatterjee. “Our current focus is on finding out which could be the markets where we could achieve a deeper penetration, by having a wider franchise and building a more solid foundation. The aim is to have a two-sided benefit. The first would be via liabilities, as it could provide us the access to better funds at a lower cost. The second would be via assets, through which we could also provide a deeper linkage to India.”