StanChart India: A New Chapter Begins

RUNNING BANKING FRANCHISE with a squeaky-clean book is more an art than science. For someone who is as soft-spoken as Zarin Daruwala, her efforts at turning around the fortunes of Standard Chartered Bank in India have paid dividends. Having taken on the top job at the fag-end of 2015 at the country's oldest foreign bank, the 58-year-old signed off FY22 on a record high ₹6,480 crore in profit before tax, the highest ever in the history of the country's oldest (165 years!) foreign bank.

Daruwala is quick to point out the need to look at profit before tax (PBT) and not profit after tax (PAT): "Foreign banks are taxed at the highest rate of 43%, hence, PAT is not comparable as local banks are taxed at 25%." She inherited a loss-making 100-branch franchise. Under her leadership, Standard Chartered Bank India achieved growth and success, including expanding its digital banking capabilities and launching innovative products and services. As a result, India turned out to be the third-largest contributor to the bank's global revenue and profits after Hong Kong and Singapore. The resounding all-round performance has perched the bank in No. 1 position in the foreign banks category of the Fortune India-Grant Thornton study for 2023.

For FY23, the bank has seen a slight dip in its PBT levels at ₹6,370 crore, even as total income has grown by ₹230 crore over the previous year. "Our performance could have been better, but it's not bad either as our costs went up by ₹300 crore owing to higher data localisation and other statutory expenses," says Daruwala. The bank also caters to the offshore fundraising needs of India's biggest conglomerates but that does not reflect in the books of the India entity. "For foreign banks, it's not just about rupee performance alone because we do a lot of business offshore that doesn't come in our books but might show up in the books of either Singapore or Hong Kong. Our management, typically, assesses us on a franchise basis, which means your local results plus what you throw to the network," reveals Daruwala.

Incidentally, Daruwala, who headed corporate banking at ICICI Bank, just waded into the mess that the foreign bank had found itself in, both on the corporate and retail side when she took over. "There was a lot of scepticism when I took on the retail portfolio as I had set very steep targets. I made it clear to the team that we could not be loss making," she says. A hands-down and an open-door approach for more than a year ensured positive results.

Also, instead of increasing the number of branches, Daruwala chose to focus on improving the efficiency and profitability of the existing network. "A lot of the branches were not up to potential. So, the focus was how do you turn around the branches and get each branch to be profitable. There's no sense adding branches when existing ones are not being sweated. Barring the three-four statutory branches in weak locations, today all our branches are profitable," says the CEO. An increased focus on digitisation helped. "We are in 42 locations but with digital just a single branch is enough to cover a larger footprint. While corporate banking is completely digital, almost 90% of our new retail customers are onboarded digitally." The emphasis was also to leverage employees of existing corporate clients to bank with StanChart. "You can cross-sell a lot of products such as cards, plus you get a savings account," mentions Darwuwala. While on the corporate customer side, offering tailor-made solutions and API banking helped, on the retail side, there was a huge focus on enhancing wealth proposition and improving service standards. "The message was clear down the front lines that no customer escalation issues should reach my table," she adds.

Investment in analytics at the bank level has also helped relationship managers improve connect with clients. "If some client is moving a large deposit from the account or pinging a credit bureau, the feedback loop is real time for the relationship manager to get into the act," says Daruwala. It helped the bank improve its CASA by 3-5% year-on-year in FY23.

When Daruwala took over, the bank's bad loans were more than 15%. Today, net NPAs are lower from 0.5% in FY22 to 0.4% in FY23. "The total NPA is just ₹380 crore," she says. Just a year prior to her joining the bank, Bill Winters had taken over as the CEO of Stanchart's global operations and had presided over a $5 billion capital raise. "Taking provisions was easier as I didn't have any constraints," says Daruwala. Since foreign banks operate in India as wholly owned subsidiaries, it can be an expensive affair as the capital gets deducted from the Tier 1 capital of the parent. Daruwala has not only brought down the bank's bad loans, but also managed to boost the CASA ratio from 32% in FY15 to 55% in FY22.

The clean-up on the books has come along with increased risk-mitigating mechanisms, including monitoring tools. For instance, the bank has deployed analytics tool 'Mosaic', which provides real-time financial analytics. "There was a time when you wouldn't know if a promoter took money out from another company, as these are related parties. Today we have tools that give us that information," says Daruwala. The analytics tool is so exhaustive that the bank will also know in time if its corporate client is defaulting on its statutory dues! Learning lessons from the past has also influenced the bank's decision to stay away from certain sectors. "Even in construction we might look at funding a L&T, but staying away from lesser-known realtors," says Daruwala. The checks and balances approach also meant that before a loan proposal gets to the table, the team should have done a plant visit.

Effectively, StanChart has managed to bury the ghost of its past with a new look at the future. Daruwala sums it up better: "Banking is not complicated. It's just about being common-sensical."