Summary
The SBI which is the largest Indian bank by all measures is expanding its international presence in harmony with the emergence of India has one of the future leader of the world economy.
SBI is systematically going after the overseas indian communities aiming at being the dominant banker of the NRIs.
SBI is following the expansion of the Indian Corporates internationally.
SBI strategy is not unique; the traditional Indian banking sector is going through a process of modernization and globalization.
Analysis
This announced bold strategy from SBI is not a surprise; we should expect over the next coming years more initiative from Indian financial services companies in the international markets.
SBI is developing a two fold strategy around 32 existing overseas networks and more than 150 foreign offices:
- on the Retail side SBI is now going aggressivally to expand its penetration within the large Indian overseas communities: UK, USA, Canada, UAE, Singapore with a two segments of coverage: a) the mass retail, but also, b) the High Net Worth Indian offshore community. On the first segment the main business is on remittances with India (a very lucrative activity similar to the Western Union model). On the second segment the approach is more on facilitating investments in India and follow the natural desire of the Offshore Indians to take an active role in the economic development of their motherland.
In selective countries (Mauritius, Maldives, Nepal), SBI is aiming at becoming the dominant bank of the country (all having large indian communities).
Obviously India is centralizing all the back-offices/call center/central IT functions.
- on the Corporate Banking side, SBI is trying to catch-up with the already well advanced internationalization of many Indian Corporates. The Tata (Jaguar-Land Rover, Corus, Taj.....), Mittal (Usinor...), Reliance (Dreamworks...), Dr Reddy, Infosys.... to name a few large Indian Groups have been on an aggressive international buying trail over the past couple of years; this trend will increase over the coming years with large but also small/medium size acquisitions. The Indian companies getting more and more international, they are expecting services from their domestic bankers. Or more specifically, if the Indian banks don't grow internationally, they are facing the risk of loosing their large corporate customers who will migrate to International Banks active in India (Standard Chartered, HSBC, Deutsche Bk, BNPP.....).
The Indian Banks have not been exposed to a high degree to the difficulties of most of international banks over the past 2 years; one of the best Central Bank in the world as well as the low level of internationalization have implicitly protected the Indian banks from the present turmoil. Thanks to a sound and strong capital base, SBI and other Indian banks (ICICI, HDFC, Punjab National Bank...) will be expanding their footprint by acquisition. Opportunities are numerous in UK and the US to presently acquire retail & SME networks; the Indian banks feel now ready to move!
It is also worth to follow the development of an active asset management industry: strong of very talented managers trained in NY, London or Singapore, we shall see over the next ten years the emergence of new strong franchises which shall buy and consolidate existing boutiques. The Reliance group, among others, is known to look at buying asset management platforms.
Finally we see an effective development of Indian actors in many financial services which are taking advantage of the country strong IT capabilities: custodee services, clearing services, documentary credit services but also in the securities reevaluation services and on the research.
The Indian Banks having now the Capital base, the Customer base, the fantastic IT capability and an amazingly well trained workforce...shall become, like their country, the next big "gorillas" of the banking industry.
For any international banks, these new actors have to be taken very seriously as strong emerging competitors.
This author consults with leading institutions through GLG
Analyses are solely the work of the authors and have not been edited or endorsed by GLG.
