I-banking is going through a difficult stage: Ashok Vaswani, Barclays

Investment banking may be glamorous, but its impact on financial services is waning, says Ashok Vaswani, chief executive of personal and corporate banking divisions at Barclays. Key to the British bank’s strategy to adjust to the post-credit crisis world, Vaswani, 53, spoke in an interview to ET’s MC Govardhana Rangan about plans for India. Edited excerpts:

With Barclays trimming some businesses, what is the message you are conveying to your Indian staff?

There is a sense of optimism about India. There is a sense of optimism, cautious optimism, about India, both in India and overseas. I think it’s the right time for us to kind of think about our operations in India. On May 8, we at Barclays did a pretty significant resegmentation, reorganisation of the business. And in light of that re-segmentation and reorganisation of the business, understanding what our strategies should be for the Indian market is important and that’s why I am here. What is really nice is the stability of the management team. Maybe, this is the time we can open the throttle a little bit and move a little faster.

Your CEO Antony Jenkins has declared that “investment banking is dead”. In India, you had declared “retail is dead”. What is left for Barclays in India?

We should put this in context, right? What we are saying is that the investment banking industry is going through some level of significant structural changes. We will have to adapt our investment banking division to deal with that structural change. What does that basically mean? That basically means that Barclays was overly dependent on the investment bank and the investment bank was overly dependent on fixed income, commodities and currencies as a business. What we are saying is we do not want the overdependence on the investment bank or on fixed income, commodities, and currencies. We would like to see a more balanced kind of bank and therefore, if you think about it, personal and corporate banking as a division now is about slightly larger than the investment bank. Of course, we have Africa and we have Barclaycard. So, we have got to think about a plane now flying on four pretty equal engines, so to speak.

What is the scene in India?

In India, we will obviously play in the areas where we can add some value, where we can bring some competitive differentiation, where we can do something different. There is no point in playing in some place where we don’t have competitive advantage. So, if you really think about it, we are uniquely positioned in the UK-India, India-Africa corridor.

Now, there is a lot of investment that is happening in Africa from India and of course, the traditional linkage between the UK and India has always been very, very, very strong. So, we are uniquely positioned to play in that kind of corridor. Frankly, there is nobody better than us in that kind of corridor. So, I would like what the team and I have been kind of talking about… how do we focus our efforts on building that out, that means right from dealing with corporates which are interested in playing in this corridor, whether they have operations there or whether they have operations here which kind of link-up, whether it is FIs (financial institutions) and whether they want to do things like sterling clearing and stuff like that. That’s where our competitive positioning is and that is where we will focus our efforts.

If we look back at some of the things that you said, it’s mostly investment banking business you want to trim?

I think if you are just taking that one sentence which was played up in the FT that the universal banking model or investment banking model… actually Antony (Jenkins) didn’t say that. I think it was pulled out of context. I think you got to think about this as a plane flying on four engines. The two big engines are the investment bank and the personal corporate bank. We like investment banking. It makes a lot of money for us. It’s a good business. Like every business, businesses go through different stages. The investment bank today is going through a difficult stage and that’s going to require structural changes.

So, is i-banking part of your growth strategy here?

There are going to be certain areas of investment banking that we will not do. So, for example, base metals and stuff like that or structured tax things, we will not do. We will shut those things down, but basically the IB, equity, debt capital markets, FX are clearly the areas we like and we would like to do and so, we will continue to do those kinds of things in investment banking in India as well as for Barclays.

You mentioned exploiting the link between the UK and India.

So, for example, trade. Trade is a big area which I think we can kind of expand on in a big way. I think remittance flows are another thing that we kind of talk about. Investments, which foreigners, Indians abroad want to make, whether it’s in businesses, in investment portfolios, that is another big area.

When it comes to overseas acquisitions, many Indian companies have only bad memories. How do you see that evolving?

Actually, sitting overseas, I am very encouraged. I am really encouraged by seeing Indian entrepreneurs stepping up and becoming global entrepreneurs. The rise of Indian multinationals is now really coming to bear. Now again, look, the last five, six seven years have been a really, really difficult time. It’s not been an easy time and therefore, businesses have had to go through a whole bunch of things. And there will be ups and downs, but the fact that Indian entrepreneurs are thinking multinational, I think, is a very, very encouraging sign.

In India, you shut down the retail business. What went wrong and is there a future for it in India?

Many, many years ago, we got into the retail business in India. It didn’t really work out for us from many perspectives. One of the perspectives is that we went very aggressive on the lending side of the equation, less so on the deposit side of the equation. It is difficult to build a business which is only one dimensional.

Two, we really didn’t have a unique competitive advantage. In any business, I think there are a couple of questions you need to ask. First is, why will somebody buy it from you and what is your unique position? Two, if you have a unique positioning, then you ask yourself the question that on a unit basis, can you make money? And three, if on a unit basis you can make money, then can you scale?

Those are the three questions we normally ask ourselves. If right from the word go, you don’t have a unique positioning, it’s very, very hard to do. Frankly, Barclays launching a credit card in India, how different is that going to be from an HDFC card, from an ICICI card, from an Axis Bank card? It’s not going to be significantly different. In fact, HDFC, Axis Bank, ICICI have a salary account, so they are in a better position to evaluate credit and stuff like that than we are. And therefore, there is no point playing that game where the odds are stacked up against you.

There is a debate going on in India about banks charging customers for using their own ATMs because of the costs involved in maintaining them. Barclays was one of the early banks to do so, but withdrew this measure. Can the move be justified?

Does it cost? It definitely costs. So, let’s say in the UK or in India, for example, or anywhere in the world for that matter where ATMs are linked up to each other, when a customer uses another bank’s ATM to access his account with us, we have to pay a cost. Even on our own ATMs, there is a cost, because ultimately there is a machine cost, there is a cost of replenishment of cash, some truck has to come everyday and ensure that there is enough cash, there is movement of cash, reconciliation.