Transcript Financial Institution Services Leading the Way in India Standard Chartered Bank

Financial Institution Services
Leading the Way in India
Standard Chartered Bank
May 2006
Contents
1.
India – Economic Overview
2.
India trade
3.
Financial System in India
4.
Standard Chartered India overview
Section 1
Economic Overview
Key messages

India remains among the fastest growing economies in the world

With an estimated half billion strong middle class, consumer demand in India
should remain buoyant

Demographics & productivity trends sets up India strongly for L/T growth

Manufacturing sector is more competitive and more outward looking

Balance of Payments situation is steady, long-term bias for the INR to appreciate

However, the economy is burdened by a substantial infrastructure constraint
coupled by limited Government resources

Focussed and forward looking public policy is the key to overall economic strength
There is a paradigm shift
in the India growth story!
India’s GDP growth has accelerated over the past couple of years,
and should stay above trend in the medium term
Real GDP (%y/y)
9
8
20-yr trend growth
7
6
5
4
3
2
1
0
FY91
FY93
FY95
FY97
FY99
FY01
FY03
FY05
FY07f
FY09f
FY11f
Source: Central Statistical Organization (CSO), SCB Global Research
Over the last decade, composition of GDP has changed towards
services….but agriculture and infrastructure are high on the
government agenda
GDP by sector, 2004 - 05
Agriculture
Percent
• Growth in 04/05 suffered from sub par
monsoon
52
• Focus area for government - improved credit
delivery mechanism, enhanced irrigation
facilities, land reforms critical
21
Services
• Growth driven by domestic trade,
telecom, IT/ITES, financial services,
hotels
• Agro-processing industries to benefit
• IT/ITES related services currently
USD 16 billion - 25% pa growth
expected
Industry
• Financial services growth to be led by
retail lending (smaller cities), SME and
fee based products
27
• Growth so far driven by exports and
strong domestic consumption demand
• Infrastructure a key focus area for the
government - will spur revival of capital
investment
• Several key industries (steel, cement,
etc) operating at near full capacity private sector investment outlays to
increase
Source: Economic Survey of India 2004-05, Central Statistical Organisation, SCB Global Research
India is emerging as a lucrative investment destination
Despite its size and growing profile India is still amongst the lowest
receipts of FDI inflows
% of GDP
14
12
Inward FDI inflows/GDP: 2003 %
8
Most attractive global business locations
Responses of Transnational Corporations
6
Prospects for 2005-06 (% of TNCS)
10
4
100
2
0
-2
87
90
80
SG
HK
CN
MY
BR
TH
IN
SK
SA
PH
ID
70
60
51
Source : Fitch, SCB Global Research
51
50
Most attractive prospective R&D location in the UNCTAD
survey (2005-09)
Percent of responses
33
30
20
62
13
13
11
7
10
35
nd
ad
a
C
an
U
K
la
Th
ai
an
y
o
G
er
m
ex
ic
M
B
ra
zi
l
si
a
R
us
U
S
na
C
hi
41
45
a
0
55
29
* Countries are ranked according to the number of responses that rated each as
the most attractive location
25
15
15
13
10
9
Source : UNCTAD, World Investment Report 2005: Transnational Corporations
6
4
5
-5
16
20
In
di
65
40
China
India
UK
France
Source : UNCTAD, World Investment Report 2005: Transnational Corporations
Netherlands
4
India has the second largest economy in Asia Pacific (ex-Japan)
and is forecasted to grow at 7% pa through 2010
GDP by country, 2004
USD billion
2400
1920
1649
1800
1200
195 175
164
163
118
107
86
68
74
Thailand
Malaysia
Singapore
Phillipines
Iran
Egypt
258
Hong
Kong
Taiwan
Korea
India
China
UK
0
306
Turkey
600
South
Africa
658
Indonesia
694
Source: SCB Global Research
Industrial production has picked up which, coupled with strong
portfolio investment flows, is driving equity market to new highs
Manufacturing sector is driving industrial growth
Percent
10
Growth in manufacturing sector
8
Growth in industrial production
Stock market turnover up – particularly derivatives
USD billion
6
4
600
2
BSE+NSE spot
0
Fiscal Year
2001-02
2002-03
2003-04
2004-05
BSE+NSE derivatives
400
2005-06
200
Foreign investment flows are up – particularly portfolio
USD billion
12
Direct investment
Calendar Year
0
Portfolio investment
2002
2003
2004
9
Turnover Ratio*, 2004 = 107% (12th rank)
6
Rank
Percent
1. UK
165
4. China
139
2. Taiwan
163
9. Korea
118
3. Turkey
141
13. Thailand
98
3
0
Fiscal Year 2001-02
2002-03
2003-04
2004-05
Source : Economic Survey of India 2004-05, RBI * turnover ratio = annual trading volume / market capitalisation
Rank
Percent
Demographic trends are an Indian asset
Favorable income and demographic profile coupled
with low banking sector penetration present
opportunities
Demographic transition in India
Mn of people
Projected distribution of population
% of population
Under 15
400
15-64
65+
100%
350
Rural
90%
Urban
80%
300
70%
250
60%
200
50%
150
40%
100
30%
20%
50
10%
0
0-14
15-29
30-44
45-59
above
59
age not
stated
0%
2001
2006
2011
2016
2021
2026
Source : Registrate General of India, Economic Survey of India 2005-06
Favorable income and demographic profile coupled
with low banking sector penetration present
opportunities
Credit to GDP ratio is amongst the lowest, significant potential for financial services
Percent
Japan
China
Korea
Thailand
2004
Brazil
Low and middle income
India
0
20
40
60
80
100
120
140
160
180
200
Source : World Bank, RBI
Section 2
India Trade
India’s trade snapshot



Total exports: USD 72 bn
Total imports: USD 98 bn
Top export commodities:






Gems & Jewellery
Petroleum: Crude & Products
RMG cotton including accessories
Drugs, Pharmaceuticals & Fine Chemicals
Machinery & Instruments
15.41%
11.21%
6.07%
4.68%
4.56%
Top import commodities:





Petroleum: Crude & Products
Electronic goods
Gold
Pearls, Precious/Semi-precious stones
Machinery except Electronics
30.17%
9.09%
7.69%
7.13%
6.74%
Exports, Import – Top destinations

Top export destinations:






USA
UAE
China
Singapore
UK
17.18%
8.19%
6.01%
5.71%
5.18%
Top import destinations:





China
USA
Switzerland
Germany
Belgium
7.41%
5.57%
4.76%
4.11%
3.60%
Government has ambitious plans on trade … target
to double share of global trade by 2009
Trade flows have been growing @ >20% in past few years …
 India’s largest exports comprise chemicals,
ores and minerals, textiles, engineering
goods
USD billion
100
Imports (Non oil)
80
 Over the last 2-3 years, export basket has
changed to include petroleum products and
automobiles
Imports (Oil)
Exports
60
 India’s largest imports comprise oil, gems &
jewellery (for re-export) and telecom & power
equipment
40
20
0
Fiscal
Year
… resulting in increased share of the global market
2001-02
2002-03
2003-04
2004-05
Percent
1
0.8
0.6
0.4
0.2
0
2002
2003
2004
Source : Economic Survey of India 2004-05, Department of Commerce
Feeding India’s appetite
Chile’s export growth to India key driver to bilateral trade ….
USD million
700
India exports to Chile
600
India imports from Chile
500
Total bilateral trade
 Chile’s largest exports comprise copper
ore and concentrates, other metal ores
and minerals. Minor categories include
paper products, fish & fruit.
400
300
200
100
0
Fiscal
Year
2002-03
2003-04
2004-05
2005-06 (F)
 CAGR projections suggest export growth
of 7-10% remains consistent with broader
India growth of 7-8% over 2006-10.
… underpinned predominantly by copper
USD million
500
400
 The prospect of reduced trade tariffs in
2006 onwards suggest export growth risks
lie to upside. This will continue to be
driven by India’s growing demand for
industrial materials for capacity and
infrastructure expansion.
Agriculture
Mining
Industry
300
 Exports to India doubled in 2003-04, now
moderating towards 10-15% y/y. Chilean
imports from India maintain a more
sluggish rate of growth, 0-5% y/y.
Other
200
100
0
2002
2003
2004
2005
Source : Economic Survey of India 2004-05, Department of Commerce
Section 3
Financial System in India
In a nutshell

Securities market is doing well

Insurance market opened up partially 5 years ago

Banking sector - much progress

Opening up the pensions market under way

Global banks & institutions: some in, some watching
Banking Structure in India
Scheduled banks in India
Scheduled Commercial Banks
(293)
Scheduled Co-Operative Banks
(2000+)
Public Sector Banks
(27)
Nationalised Banks
(19)
Scheduled Urban Co-Operative Banks
Scheduled State Co-Operative Banks
State Bank of India & it's associates
(8)
Foreign Banks in India
(40)
Regional Rural Banks
(196)
Private Sector Banks
(30)
Old Private Banks
(22)
New Private Banks
(8)
Figures in brackets indicate number of banks in each group
Source : RBI Report on Trend and Progress of banking in India 2003-04
Indian Banking Sector - Much progress

Towards international norms in accounting & disclosure

Investments in technology & Centralization of back offices

NPL problem - looks manageable

Partial privatisation - most banks listed

Balance sheets cleaned up, some banks have adopted US GAAP
standards

Capital Infusion by Government to strengthen weak banks
Banking Regulation – A snapshot

Regulated by Reserve Bank of India - Apex regulatory institution

Can be classified into the following :

Public Sector ( State Owned) banks : 28 in No

Private sector banks

Foreign Banks

Cooperative / Rural Development Banks

Foreign banks allowed to offer full product suite including INR clearing,
consumer and corporate banking products

A sample of some regulatory prescribed minimum ratios :



Capital Adequacy ratio : 9%
Cash Reserve Ratio : 3.5%, Statutory liquidity : 25%
Directed lending ( priority sector ):


32% for foreign banks
40% for other banks
Indian Banking Sector - Highlights

Government banks have 75% of the business. State Bank of India
Group alone has 25%.

Five global banks & 2 private banks lead the way in customer
service, technology, product innovation.

Foreign banks dominate the upper end of the retail & corporate
market

Consolidation is under way
Section 4
Standard Chartered India overview
India’s Leading Foreign Bank
Leadership Across Products
#1 Foreign bank
Balance Sheet Size (US$ bn)
Wholesale Banking
9.00
7.62
8.00
6.58
7.00
5.64
6.00
5.00
4.00
3.00
2.36
•
Trade 1st
•
Cash 3rd
•
Foreign Exchange 1st
•
Interest Rate Derivatives 1st
•
Fixed Income/ Syndications 1st
•
Custody 1st
2.00
Among private and foreign banks
1.00
ABN
HSBC
CITI
Independent Recognition
2006 Best Cash
Management
South Asia
2004
Best Bond House
India
Best Cash
Management Bank,
MESA
Best Debt House
India
SCB
Consumer Banking
Net Profit (US$ mn)
127
140
133
120
100
80
60
44
44
40
20
•
Cards receivables 1st
•
Personal loans1 3rd
•
Auto loans1 2nd2
•
Deposits 1st3
•
Investment Services 1st2
Review of the
Year 2003
Runner-up
Best Overall Arranger
of Domestic Currency
Asian Bond
0
ABN
HSBC
CITI
SCB
1
Share of new flows
2 Among bank distributors
3 Among foreign banks
SCB has clearly demonstrated its commitment to India
Best Bank in
Emerging
Currencies
Enterprise Wide
Transformation
(B2BeX)
Asia-Pacific
SCB – a comprehensive banking solution
 Leading the way in Asia, Africa and the
Middle East
 Largest international bank in India
Cash management
Trade Finance
Bilateral Credit
 Strong focus on India
 Top 3 foreign bank in each major market
Raising Capital and
Risk Management
 Product delivery
 Strong on-shore presence and in-depth local
knowledge
 Relationship and leverage with key corporates
and institutions
 Stature and rapport with regulators
 Our Value Proposition
 Coupled with our deep understanding of the
local markets, our product capabilities are
tailored to suit our client’s needs, whether they
be a local corporate or multinational
Strategy and Equity
M&A
Forfaiting
FX, Derivatives
Structured Trade Finance
Securitisation
Fixed Income
Loan syndication
LBO/MBO
Equity Private
Placement
Private Equity
Investing
Project & Export Finance
Arranging & Advisory
Sample Financial Institution Client Base in India
Working Together – How SCB India can help

SCB Can assist with credit reports
– On Indian Banks
– Indian Corporates

Issue Guarantees in India
– Turnaround is fast
– Our guarantees are acceptable
( even by government units )

Advise/ Confirm / Negotiate L.c.'s for
Indian beneficiaries
 Remit funds in INR
 Corporate referrals
 Open accounts for your customers
– Full banking service providers
– Employee account solutions
Contact information
Financial Institutions, India
Pradeep Sarin
Telephone
+91 22 5631 4111
Facsimile
+91 22 5631 4166
Email: [email protected]
Tejinder Singh
Telephone
+91 22 5637 2363
Facsimile
+91 22 5631 4166
Email: [email protected]