Ex-Citigroup Banker Taps Global Talent to Revive India Bank

  • Hiring from banks including Barclays, Standard Chartered
  • Bank’s bad-loan ratio at highest in at least 10 years

Bank of Baroda, India’s third-largest state-run bank, is looking to a slew of senior managers poached from foreign lenders including Barclays Plc and Standard Chartered Plc to help drive profitability at the 108-year-old company.

In the past three months, the Mumbai-based lender has hired Manoj Piplani, a managing director of Barclays’s U.K. card business, to lead its card and payments operations and Ratnesh Kumar, managing director at Standard Chartered, to head its investment-banking arm. The bank also added a former Citigroup Inc. employee to transform its Nainital Bank Ltd. unit and recruited advisers for its chief executive officer from firms including JPMorgan Chase & Co.

The hiring will have a “multiplier effect” as the recruits train others and put new structures in place, CEO P S Jayakumar said in an interview on Feb. 11. “Cash management, supply-chain management and the retail side are other areas in which we made hires from competitors and we’re currently looking for people in analytics.”

Jayakumar, 54, and Chairman Ravi Venkatesan, former chairman of Microsoft Corp.’s Indian unit, were brought to Bank of Baroda in 2015 by Prime Minister Narendra Modi’s government as it attempted to overhaul the banking system. More than a year later, the executives still face the lingering challenges of swelling bad loans, declining profitability and underperforming shares.

Asset Quality

Shares of Baroda have lost 6 percent since Jayakumar took over in October 2015, compared with a 18 percent gain in the 10-stock BSE Bankex Index. The consensus 12-month price target for the bank is at 176.7 rupees, according to estimates of 40 analysts tracked by Bloomberg. That’s higher than price of 165.80 rupees at 11:49 a.m. in Mumbai trading on Friday.

An asset-quality review led by the central bank that started before the new CEO arrived forced Baroda to recognize more loans as having soured, driving its nonperforming-loan ratio to 11.4 percent as of Dec. 31, the highest in at least 10 years.

Its profitability, as measured by return on equity and assets, turned negative in the year ended March 2016, the first time in more than a decade, data compiled by Bloomberg show. That happened even as Jayakumar took steps to improve asset quality and lowered borrowing rates, drawing skepticism from some analysts over the effectiveness of his strategy.

“His efforts are yet to reflect in the earnings and we have no visibility regarding improvement in asset quality or profits so far,” said Siddharth Purohit, a Mumbai-based analyst at Angel Broking Ltd. “For Jayakumar’s plans to work well, asset-quality issues have to get resolved and credit demand in the country has to pick up.”

Jayakumar expects his efforts to bear fruit over the next two years. “This is a work in progress,” said the banker, who worked for 23 years at Citigroup in roles including head of Asia-Pacific consumer finance.

The CEO is looking to his private-sector hires to boost consumer loans. He has tasked Manish Shah, who previously worked at Citigroup and Aegon Religare Life Insurance Co., to turn Baroda subsidiary Nainital Bank into a so-called challenger bank that can compete for business with established nationwide lenders.

Shah will assemble a team and add technology infrastructure to turn Nainital into a digital-focused bank over the next year, Jayakumar said. The unit, based in the north Indian state of Uttarakhand, has 130 branches, its website shows.

“State-owned companies seek to make senior management hires from overseas rivals as they bring with them rich experience in putting in place strategy, systems and processes that can be aligned to the Indian context,” said Mansi Mehta, a partner at Mumbai-based executive search firm Nodus Talent International.

Mortgage Rates

Jayakumar has been increasing the bank’s ability to deal with bad debt by setting aside more funds to cover loan losses. The amount of funds put aside relative to total bad loans -- known as the provision coverage ratio -- has risen every quarter since Jayakumar took over to 65 percent as of Dec. 31, the highest among the five largest state-run Indian banks by assets, exchange filings and data compiled by Bloomberg show.

Baroda has also been boosting loans to highly-rated companies and retail borrowers, and is offering the lowest mortgage rates among Indian lenders, Jayakumar said. Its mortgage rate of 8.35 percent compares with 8.6 percent at State Bank of India and 8.65 percent at Housing Development Finance Corp.

The lender has started to “prune down” loans with lower returns, helping it to improve capital ratios, Jayakumar said. Total loans fell 9 percent in the year to Dec. 31, filings show.

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