As lure of foreign investment banks decline, banking executives move to India

MUMBAI: When senior banking executives Jaspal Bindra and K Balasubramanian quit their plum overseas jobs to join domestic firms last month, their decision did not raise many eyebrows. After all, more than three dozen such executives have moved to Indian firms over the past one year, according to industry watchers, as the lure of foreign investment banks waned and opportunities at home expanded.

Experts told ET that the decision of foreign multinational banks to focus on their home markets, dwindling deal flow and shrinking India coverage have led to an exodus of sorts of senior Indian bankers, who in their "flight to safety" are choosing domestic banks and corporate houses that are on an expansion spree.

Bindra gave up his job as Standard Chartered’s Asia head to join Mumbai-based financial services firm Centrum as its executive chairman.

Balasubramanian joined HDFC Bank to head its corporate banking business, after working for nearly two decades with Citibank, where he last headed corporate lending. Balasubramanian said most international banks are in the process of re-orientating their strategy.

Strategies are being tweaked around organisation, business and client, driven by regulatory and other reasons at the parent level.


"This restrains the international banks from participating in the growth opportunity available here. This provides a unique opportunity for domestic banks to increase market share and grow business at a disproportionate pace," Balasubramanian said.

"Naturally, the brightest talent would move to be part of this interesting journey with domestic banks," he said.

Besides HDFC Bank and Centrum, domestic firms such as Avendus, Edelweiss, IDFC, Bandhan Bank, Kotak Mahindra Capital Co, ICICI Bank, YES Bank and even startups such as Paytm have gained at the expense of foreign multinational banks including Barclays, Morgan Stanley, JP Morgan, Credit Suisse, HSBC and Deutsche Bank. Bindra had said in a press release issued by his new company in April, "Centrum is well poised for higher growth. The opportunity that lies ahead is enormous for niche home-grown companies and the ability to lead Centrum’s next chapter is exhilarating."

Earlier, Pankaj Naik quit JPMorgan to join Avendus, Randhir Singh moved from Deutsche Bank to Edelweiss and Goldman Sachs’ Kapil Singhal joined Edelweiss, all choosing bigger roles at smaller firms that are expanding unlike the overseas companies.

As per data compiled by executive search firm Vito India, the headcount in front office banking functions shrank a fourth in global banks to 1,875 from about 2,500 during the heyday of 2007 before the collapse of Lehman Brothers a year later.

In 2015, there were 114 lateral recruitments overall across front office banking functions whereas there were 311 exits. Overall, since 2012, there have been only 422 lateral recruitments in front office whereas 922 people have exited front office functions in global banks, the data shows.

"Bankers are more amiable to pursue strong domestic houses backed with capital, sound business plans and a good leadership team where the promoters are keen to professionalise, scale-up and leverage their global perspective," said Ayesha D’Souza, practice head banking at Vito India.

This is a definite trend at the director level, said Siddarth Raisurana, director at ABC Consultants. "One reason for this is redundancy," he said. "There are a lot of MNC guys who, even if they get a job in another MNC bank, do not want to go back as they feel they can add more value to Indian banks and NBFCs (non-banking finance companies)."

Explaining the rationale behind such career moves, Raisurana said, "That’s where they see a stable career, longer future and longterm wealth creation opportunity. Even if they do not always get the high fixed compensation, in the long term it is a win-win situation."

Data from Dealogic bears this out. The total fee pool for investment banking in India shrank to $533 million through 1,018 deals in 2015 from $603 million earned through 1,027 deals in 2014, figures from the global investment banking and M&A data provider show.

The total volume of deals done across syndicated loans, equity capital markets, debt capital markets and M&A saw a sharp decline to $160.3 billion in 2015 from $202.4 billion in 2014.

Most of the global banks have reworked their India strategy amid growing concerns in their home markets. With once promising markets such as India failing to deliver the expected rapid growth, these banks are withdrawing the deployed human capital. They have either shut down a few businesses or shifted their coverage out of the larger Asian pool.

In such a scenario, domestic firms have cemented their position in the market. As per the Dealogic data, four domestic firms figured among the top 10 in terms of value of deals done last year, storming into a club that almost exclusively comprised foreign firms earlier.

Data from Vito India shows that the number of foreign executives in investment banking came down to 181by the end of 2015 from 375 in 2007. Similarly, the headcount in global houses of institutional equity firms has fallen to 390 this year from about 500 in 2007.

Fixed income operations have been the worst hit, with the number of executives nearly halving by 2015 from 600 in 2007. Corporate banking and transaction banking were the least affected, according to the data, as these were absorbed by newer one-branch networks and domestic banks.