Sep 19, 2008

Business - India;How Deutsche Bank transformed itself

Sometime during the course of his workday, Gunit Chadha likes to get out of his office and stroll out for a cup of coffee at a nearby cafe. When he was with Citibank in New York, it would usually be at Starbucks. Now that he’s in Mumbai, the CEO of Deutsche Bank (DB) goes over to the Barista that’s just down the road from DB House. Sometimes he’s alone and sometimes he’s accompanied by a colleague he wants to have an informal tetee-tete with. Today, he’s with me, for the final interview in a series that’s stretched over two months. The project: to detail how DB India has transformed itself from the sleepy little 500-employee bank it was five years ago to the fast-track 7,000-people player it now is.

Chadha was prone to throwing around words like ‘passion’ and ‘commitment’ when we started the project, but since then, I’ve met ten of DB’s 27 managing directors (a designation Chadha introduced to DB, which he’s obviously bestowed lavishly) and I’m now a banking expert. How much capital has DB been pumping into its Indian operations, I ask pointedly. Acknowledging my new-found mastery with a grin, Chadha says, “We recently had a capital infusion of Rs 2,155 crore — just months after we had already brought in Rs 1,125 crore. That underscores India’s significance in DB’s global scheme. It’s one of our fastest growing markets , globally.”

For most of its 28 year history in India, DB was a niche commercial bank, focused on financing trade between India and Europe. Headed by a series of expatriates who saw no great prospects in India, it actually shrank its business, selling off its retail operations to other, more aggressive, foreign banks. Its corporate clients were mostly restricted to MNCs and it eschewed upcoming Indian companies as a matter of policy. “If we’d stayed that way, we would eventually have lost market share across businesses,” says Ravneet Gill, managing director and head of corporate banking, who has been with DB for 17 years and seen its transition.

Today, DB has passionately embraced India’s corporate sector , with 60% of its corporate banking revenues coming from mid-cap companies it would not have touched with a barge pole five years ago. It has expanded operations big-time , moving into every area of banking, from equity broking and investment banking to retail and private wealth management , and it has set up four large off-shoring centres in the country. The culture of the bank has changed completely in the process and it’s not hard to see why. DB has recruited over 6,000 people in the past few years — poaching from the most aggressive American ibanks in the industry — and they’ve simply swept aside the old culture. “DB’s transformation has been through a focus on skills,” says Pavan Sukhdev, managing director and head, global markets. “The skills required in investment banking are very different from those required in commercial banking . As you build new skills, you build a new culture.”

Nikhil Kapadia is an example of the new culture. I’m in his elaborately furnished cornerroom office in DB House for over an hour and for most of this time, the managing director for private wealth management (PWM) is hustling a colleague in Singapore, trying to organise a meeting for one of his clients with DB’s investment banking arm. Kapadia joined DB from Merrill Lynch four years ago and he’s built the bank’s PWM business from a 12-people , Rs 16 crore operation to the 62-people , Rs 72 crore operation it is today . When he finally switches off his phone and lowers his big frame into an expensive-looking sofa, I ask him the question I’ve been asking everyone else: How has DB managed to transform itself over the past five years? “The bank made two important strategic moves,” he declares . “The first was hiring experienced senior business heads to run the various business lines and the second was its re-entry into retail banking,”

On the ground floor of DB House, Sanjay Sharma has just moved into a new office and his things are stacked everywhere . Fast growth inevitably leads to a space crunch, especially in a city like Mumbai, and the managing director, equity capital markets, has already moved thrice since he joined DB a year ago. Once a Merrill loyalist (he spent 14 years in the firm), Sharma was persuaded to join DB — he had said ‘no’ thrice earlier — only when he was convinced the bank was ready to hit the big league. “In i-banking , capability , commitment and comfort are the three key factors considered by corporates while appointing a bank — and comfort is the most important,” he says. “DB needed people who could provide customers with the comfort factor.”

Once considered the prerogative of the Wall Street firms, i- banking became a focus business for DB world-wide only in the mid-90 s. The timing couldn’t have better for DB India, for this was a time when Indian corporates were just waking up to the lure of global acquisitions. Another push came from Anshu Jain, a ‘proud Indian’ who quit Merrill Lynch to join DB’s top management in Frankfurt. Jain has championed the cause of growth and investment in the emerging markets since then. He’s the one who raised the bank’s profile in the Indian bschool campuses, personally conducting pre-placement talks and offering up global postings. “Till then, DB was a day-3 company at the IIMs,” says Piyush Gupta, managing director, global markets. “Then we became one of the first foreign banks to recruit from the IIMs for foreign postings. It was a calculated strategy and it lifted our public profile majorly.”

Over the past five years, DB has leveraged its global presence to swing some high visibility deals, such as Tata Steel’s acquisition of Corus. DB managed to bag the Infosys ADR deal in 2005 by flying in its hot shot lead analysts from New York to Bangalore, with the promise that it would bring in exactly the kind of investors the company wanted (read: new investors who had never bought into Infosys). Today, most of DB’s profits come from i-banking and according to Sanjay Agarwal, managing director , corporate finance, “We’ve predominantly become an investment bank. And we’re not second-tier any more.”

The importance of i-banking in DB is evident from the fact that the operation is located in DB House, the elegant heritage building that serves as its headquarters in India. Not too far away, there’s Kodak House, a less-imposing heritage building in the heart of Mumbai’s Fort area, which houses other operations like transaction banking. Launched seven years ago, DB’s transaction banking operations have taken off in the past four years and the German bank is now a market leader. For example , it’s the one that telecom companies like Airtel, Vodafone and Tata Telecom entrust with the collection of money from millions of subscribers across the country. DB has managed to build this operation through high grade IT systems and partnerships with 19 state-level banks like Federal Bank in Kerala . “The fact that DB’s so big in transaction processing is one of Indian banking’s best kept secrets . Over time, we’ve achieved the scale needed for processing large low-value transactions,” says managing director Kaushik Shaparia, who joined DB right after graduating from IIM-Ahmedabad in 1985, making him the bank’s seniormost old-timer .

DB India’s new new thing is offshoring, for which it has created two separate companies . The first, called Global Markets Centre Pvt Ltd, is akin to a rocket science institute, employing 300 mathematicians and engineers (many of them PhDs) to do analytics for DB’s trading desks across the world. The second, called DB Operations International (DBOI), is a 4,500-employee BPO operation spread across Mumbai, Bangalore and Jaipur. I’m with managing director Arindam Banerji in Andheri, talking about the impact of this huge offshoring venture on DB’s culture, when a fire drill alarm goes off and puts an end to our philosophical discussion.

Banerji set up JP Morgan’s offshoring centre in India before moving to DB four years ago to set up a similar operation , so he’s a BPO veteran, quite used to fire drills. He leads me down a stairwell and out of the building where we join thousands of other people , glad of the respite. “DB’s a late starter in offshoring,” says Banerji. “But the advantage is, we were able to leap-frog ahead of our peers in many ways. For example, we’ve come directly to India, whereas other banks first created ‘nearshoring’ hubs in places like Tampa, Florida. Did you know the town of Tampa still has over 40,000 people working for bank BPOs ?”

I shake my head in genuine surprise. But then, this is only one of the many things I didn’t know before the DB project.

1 comment:

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