We came out very well of the 2007-08 crisis but we were affected in 2011-12 because we were the largest bank in the Eurozone during the sovereign debt crisis there.
Joris Dierckx has been in charge of French lender BNP Paribas in India since July 2015. During this period he has overseen the bank's shift in strategy to diversify into growing markets like India even as many European peers have retreated back into their home markets. Last year, BNP Paribas completed the acquisition of local brokerage Sharekhan, which it plans to develop as a digital financial services platform. In an interview to MC Govardhana Rangan & Joel Rebello, Dierckx details the bank's plans in the country.
The advantage that BNP Paribas has is that the performance of our group is quite strong, which means we can continue to invest in the growth of our businesses to go into new businesses and to take market share. From 2013 to 2016, our plan for Asia Pacific was a switch from an ECB strategy to an onshore model, which we have done quadrupling our balance sheet to Rs 30,000 crore. We moved quicker as some other peers have disappeared and some banks have shrunk. We had to build a strategy to collect deposits from corporate clients and lending to them. Our clients are two-third Indian across corporate and financial institutions. We have actively marketed to MNC clients and grown that base. We look at the BSE 200 companies, which is now a broadened base for us. We work actively with private sector banks, because they are growing, NBFCs, insurance companies, asset management companies, etc.
How did you do in India in 2016?
It was a good year, but not fantastic. Through the growth of our balance sheet, we have been able to manage the allocation of our assets. We have been capitalising our profit and, last year, we have extended subordinated debt from the head office along with small capital injections to finance the growth of our balance sheet. So far, we have put in roughly 650 million euros (about `45,624 crore) in the bank in India. We have invested roughly 60 million euros (about `422 crore) in the last 12 months. This year, capital infusion will be more because RBI's norms are more stringent than Basel III global. We have internal approval to increase our onshore capital and are awaiting RBI's go ahead. We were able to allocate assets where it was more relevant, which allowed us to maintain profitability.
Why did you take a contrary bet when your peers were shrinking?
We came out very well of the 2007-08 crisis but we were affected in 2011-12 because we were the largest bank in the Eurozone during the sovereign debt crisis there. We had to adjust our business model very rapidly. In India, too, we switched our focus to a local currency balance sheet from a cross-border dollar-driven one. At the same time, our group's vision was, and remains, that BNP Paribas aims to be one of the few global banks that would remain truly global.
Banks have had to invest a lot in infrastructure because of regulatory requirements and technology. Only a limited number of banks are capable of doing that. The BNP Paribas Group has made the decision to invest to be one of those global banks. Because of this focus on being a truly global bank, we have been able to bring capital into India, which a lot of other banks cannot because it's not their strategy or they do not have the resources.
Secondly, the group's strategy in India was always broader than banking, focused on financial services, working through partnerships and that model is now evolving. In terms of breadth of activity, we are large and that is the longterm strategy for the group. Mutual fund, for example, is a small business for us currently, but we are investing in building it. Over time, as the mutual fund market develops, our mutual fund business in India will also grow.
Most foreign banks have stuck to corporate banking but you have a brokerage, mutual fund. What makes you confident about these businesses?
Our view is there is a huge potential in retail but the art is to tap in as a foreign player without over extending. Banking is a dynamic space, so we have to be realistic on what we can do. Personally, I think foreign banks have to be complementary to the local banking system which means we have to provide connectivity to global markets, geographic markets and we bring in technical know-how from other markets. It is very difficult to compete with domestic players, so we have to offer a complementary service to what they can do. India requires long-term commitment.
Sharekhan's clients are mostly at the lower end, what does it bring to you?
The retail brokerage is a successful business for us in Europe. Sharekhan is being developed along the lines of the bank's German strategy where the bank had brokerage and they acquired another broker in 2014 and consolidated the market position. A lot of retail business is being done on that platform in Germany and we are also doing a lot of digitisation projects on that. Sharekhan is also from the same business line, which is historically the brokerage but now being used as a platform for digital and mobile business for financial services to retail clients. We think India will grow bigger in terms of GDP per capita and market capitalisation as a percentage of GDP. More than 70% of savings in India are in bank deposits, which will also switch to more sophisticated savings and investment products, like equity. We want to be positioned in that market to capture the growth that we see coming. We want to also increase Sharekhan's market share in retail equity brokerage and double their 1.4 million clients and expand the product range into mutual fund and life insurance.
Do you see them becoming your bank's customers as well?
For now, no. We very consciously use the word retail financial services, savings and investment products. Sharekhan has been operating without a captive bank, so it works perfectly fine and we don't see any change in that. It will continue to operate as a retail savings and investment product platform.