Financial Daily from THE HINDU group of publications
Monday, Feb 21, 2005
Public Sector Banks
Money & Banking - Interview
`SBI keen on local, global acquisitions'
Mumbai , Feb. 20
STATE Bank of India recently acquired a bank in Mauritius and is looking for similar buyouts in Asia and Africa.
While aggressively pursuing this global growth strategy, the country's largest bank is also scouting for suitable takeover targets locally.
In an interview to Business Line, Mr A.K. Purwar, Chairman, SBI, explained the rationale of investing in the Mauritian bank and the bank's plans for growth, both internationally and locally. Excerpts:
What is the idea behind taking over a small bank like Indian Ocean International Bank (IOIB) in Mauritius?
IOIB is a good bank, the fourth largest in Mauritius. We will upgrade its technology and take it to the number one position, with a retail focus. This acquisition would also enable us to expand our network in the neighbouring economies.
SBI has mostly been an inward looking organisation. Locally, we have grown from 400 branches in 1955 to almost 14,000 branches in 2005. Globally, we have hardly grown - we have 54 offices spread over 38 countries.
As the largest bank in the country, it is befitting for us to have some global ambitions and a global presence.
Our bank would also like to position itself to handle business in keeping with the country's growth in external trade. This is why we have a substantial overseas expansion on the cards.
We are new to this area; we have never acquired banks overseas. So, to begin with, we would like to acquire some small banks; gain some experience; and even burn our hands, if need be.
Are you looking for similar acquisition in other countries?
Yes, we are looking at Asia and Africa.
What about your Nigeria subsidiary that requires additional capital infusion as per the latest regulations in that country?
In Nigeria, we will pump in $50-60 million into our subsidiary and may go in for a partnership with some strong local bank.
The Nigerian banking system is going through a consolidation process. We are looking at various options, one of which is to merge with a strong local bank.
You seem to be focussing on overseas growth. Does it mean that SBI has reached a plateau locally?
No. I would say we have an expression of interest to look for a domestic bank for acquisition. There are certain areas in our country where we don't have the kind of presence we would like to have.
We want branch network - either in private or in public sector. We are aggressive on overseas acquisitions at the moment. But, we are open to buying any domestic bank.
We have a critical mass of business at the domestic level. We are spending substantial money on technology and business processes. We already have a sound technology base within the bank, with around 5,000 ATMs.
If we takeover a bank locally, we could make the technology available literally free of cost to it and put the acquired bank on a sound footing.
What is the progress on the general insurance venture you are planning? Have you tied up with anyone?
We have not tied up with anyone so far, but we are conducting a feasibility study. At the moment we are distributing the products of New India Assurance on the general insurance side. But, as it looks, we may set up an independent business in this area, as we have done for the life insurance business.
We will approach the regulator sometime.
Does SBI plan to enter commodities trading when regulations permit?
We have already taken a stake in Multi-Commodity Exchange of India. We are also actively looking at a stake in the spot exchanges, which are coming up now.
We feel there is a big future in this business and our bank is well placed because we have 14,000 branches across the country with almost all rural areas covered. So, it should offer us a good window of opportunity.
Do you plan to apply to the Reserve Bank of India to increase your exposure to the capital markets?
We have not applied to RBI for this. Not at the moment, but will have a look at it in future as we are nowhere near the five per cent limit.
Our base is very high and we still have a lot of room.
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