“I am committed to organic growth.”

February 2011

Conversation with Piyush Gupta, CEO of Development Bank of Singapore Group, on the challenges of refocusing the bank in his first year of leadership – creating a corporate treasury to put surpluses to work – building out a Singapore loan book – pushing cross-sell to increase fees

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Here is the transcript of the video.

Emmanuel Daniel (ED): I’m speaking today with Piyush Gupta, the CEO of DBS Bank. It’s been one year and a little bit since he was appointed CEO in November 2009, and we are talking to him on the day after the bank’s 2010 full year results have been announced. Thank you for speaking to us.

Piyush Gupta (PG): Thank you for having me, Emmanuel.

ED: What have you learned from the year that has passed in leading DBS?

PG: Well, some things are pretty common to leading any large organization, so when we started at the end of 2009, the first two or three months, we figured out very quickly that there were some fundamental things that we needed to put in place to get the bank focused in the right direction. We did a lot of that. We can talk a little bit about what those were. But now, at the end of the year, I feel pretty good about where we are in the journey that we had outlined. So, like everything in life, it’s all in the execution. I feel good about how we’ve been able to execute so far.

ED: At the time that you became CEO, the balance sheet– to find a better word to describe it – was moribund. I mean, it is the largest bank in Singapore, it has a huge market share of the asset base in Singapore, but the return on assets were challenged, and the balance sheet was fundamentally weak in a sense. What does it take to succeed in commercial banking in today’s Singapore?

PG: Actually, let me correct you. The balance sheet was a problem. But it wasn’t that we had a very high asset market share. If anything, we had a disproportionately low asset market share in Singapore. Our problem is very simple, we have over 50% market share of savings accounts in Singapore. That’s over $50 billion in deposits, and unless we figure out a smart way to put those deposits to work, we’ll always have what they call an unbalanced balance sheet. So we have a lot of money, but we can’t put it to work. That is a drag on your interest margins. So what we do is take that extra money, and we put it to work in the markets, which means that we’re very interest rate vulnerable. In up cycles, we make a lot of money. In down cycles, you don’t make money. That’s been one of the biggest problems with DBS, not enough Singapore dollar assets. So the trick to converting the asset to the balance sheet and making it more active, vibrant is fundamentally this: we needed to figure a way to improve our position in the Singapore dollar loan segment. If you look at our history, we lost about 20 percentage points of market share in Singapore mortgage loans between the turn of the century, 2000, and now, in ten years, so two percentage points a year for ten years.

ED: This is the combined DBS and POSB…

PG: The combined DBS and POSB. At its peak, our market share was 40-44% of mortgages. It came down to as low as 23, 24% market share. One of the reasons for that is that we were just not focused on the value of the mortgage as a business proposition for us. We weren’t focused on distribution, etc., etc. So one thing we did early in our game last year is that we created the corporate treasury function. We didn’t have one in DBS. What the corporate treasury did is something which a lot of banks have done quite successfully, which is behavioralized assumptions around deposits and assets. Once we did that, it became quite clear that we had a real problem because the duration of our balance sheet was zero. Banks make money by going up the yield curve. So if your duration is zero, no wonder you don’t make a good return on asset on your lending. So by recognizing that, we were able to change the way we priced for mortgage loans—actually, all Singapore dollar loans—that allowed us to improve duration. So through most of this year, we’ve been able to do fixed-rate lending up to three and five years. That’s something the competition can’t do, they don’t have our deposit base. So we can change the nature of our balance sheet without dropping pricing but just going up on the duration.

ED: So if we take the dynamics of the balance sheet, being making money on the organic business, making money on the treasury front, and also there is the capital aspect, which is parking money in derivatives and so on. Which of these three components turned the tide for you in that sense?

PG: Actually, I’d say two of the three. So the first, and most important, thing that we did was organic, which is essentially to start building out the Singapore dollar loan book by duration and distribution: we started using our branches to sell, because we were only using branches as servicing channels and then we started converting that to a sales process, and we went up in duration. So that was one way. The second thing we did is even after all that, we are $50 billion long. So we put in place, through that same corporate treasury, a far more nuanced process for how we put the surpluses to work: what kind of asset classes we wanted to go in, what kind of tenors we wanted to go in, what kind of yields we wanted to get. By putting some pretty simple tools in place – I’m a simple kind of person, and risk models are one thing – but the tools we put in are very simple. We put $10 billion into this kind of asset class. We put another $10 billion into liquidity instruments. We put another $10 billion into XYZ. That allowed us to get a handle on how we use the surpluses as we put them out into the markets into the treasury and investment portfolios. So that’s allowed us to improve our yield on the treasury investment portfolio as well. On what you call capital and derivatives, we really don’t run prop positions on derivatives, we’ll use this as a customer flow to support our customer activities. So that really has limited impact on our balance sheet or our NIMs.

ED: How much of that involved you pushing the regulators to help expand your investment base, and how much of what you wanted to do was easily absorbed within the Singapore market? Do you think that what you’re doing will also help to expand the Singapore capital market industry to be able to support an aggressive bank like DBS?

PG: Actually, we haven’t made too much change in the regulatory framework yet. The fact is that Singapore has a fundamental macro-economic situation, which is we are a savings surplus country. Our fixed capital formation is a very small percentage of the national GDP relative to savings in the system. We at DBS are just at the surface. So we mirror the national income accounts. We have long deposits, and we don’t have enough investment products. We’ve been in conversation with the government and with the regulators for different ways to create incremental asset products in Singapore. So we have talked about covered bonds as a possibility. We have talked about more issuances from the treasury as a possibility. But these are not easy solutions, because it is really an imbalance at a macro-country level. So most of what we were able to achieve was really of our own doing. By figuring out and gaining market share in the Singapore dollar market, we gained market share in every category in the last year: in mortgages, in credit cards, in unsecured loans and business loans. So that’s not growing the pie, that’s just getting a larger share of the pie, which we were able to do.

ED: But the general investor in DBS and also the man on the street does not see some of the successes on that front of your balance sheet. They look at the organic business and say, “Why aren’t you looking more like an OCBC,” which seems to have done a lot more work in areas like wealth management and fee-based income, and the numbers are beginning to show on their books, basically. So what do you think you need to be doing on the product front?

PG: Well, so we’re moving away from the balance sheet and looking at what we can do on non-interest income categories. We had a great year this year. So one of our strengths is treasury-related product: FX, rates, commodities, currencies, the whole works. We made a concerted effort to start selling a lot more treasury product into our customer base. Our total customer flows in our treasury business grew from 28% to 36% year on year. It was a 48% growth from ’09 to ’10, which is actually quite remarkable. I agree with you. I think we have a lot more opportunity to continue pushing the cross-sell, the fee and non-interest related income in our customer base. So we’ve just scratched the tip of the iceberg on the treasury side. We had good success last year. We started building momentum on wealth management. We started building some momentum on investment banking-related fee streams. But I agree with you – we have a lot more opportunity to keep pushing the pedal on those.

ED: Tell me a little bit about Hong Kong. Every time I’m in Hong Kong, as recent as two weeks ago, I still see protests in the streets. I read complaints of DBS in the newspapers and so on. What will it take to get DBS out of the gutter in Hong Kong?

PG: Actually, I don’t think we are in the gutter in Hong Kong at all. So if you look at the protests, the protests are outside HSBC. The protests are outside Hang Seng Bank. The protests are outside StanChart. The protests are outside every bank in Hong Kong. So it’s not DBS which is a target of protests. In fact, we are one of the few banks who, regarding the minibonds, has struck an agreement with the SFC, with the HKMA. We came to terms of settlement. We actually already executed on those terms of settlement. We are pretty much done with the problem. So there are some stragglers who are still out on the street. To the best of my knowledge, this thing is noise, the froth in the system. What we are doing in Hong Kong right now is re-energizing the business. We actually had a very successful year in Hong Kong. If you look at our 2010 results and performance, we have been able to really change the nature of the Hong Kong space. A large part of our Hong Kong strategy is driven around anchoring the China flows. We had a very successful year, both in terms of China red chips coming to Hong Kong, but perhaps most visibly, in terms of our presence in the renminbi offshore market. So we were first to market in a whole range of renminbi categories and products. Today, we think we have about 20% market share of the renminbi interbank market in Hong Kong. That’s very significant.

ED: Yeah, but in the Hong Kong organic business itself, you haven’t overcome the challenge yet. I mean, in fact, the bank is an underperformer on the interest front.

PG: I would disagree with you again. So I’m not sure why you say we are an underperformer. We’ve been holding market share – in the face of the Chinese banks, we are holding market share better than any of the other Hong Kong banks are, and have through the last year as well. In fact, we grew market share in a number of categories.

ED: Market share, but interest income?

PG: The market! Don’t look at us and say, “Oh, my god, you guys are losing.” You look at it and say, “What is happening to the market?” Our NIM was down in Hong Kong substantially because the NIM in the Hong Kong market is down. The Chinese banks are funding in Hong Kong, raising up deposit rates for the whole industry. They’re lending in Hong Kong, dropping lending prices for the whole industry. So the fact that there is a squeeze in NIMs and interest margins in Hong Kong, it’s the Chinese banks. It’s an industry phenomenon.

ED: Is it worthwhile being in Hong Kong?

PG: Oh, absolutely. Because, for us, we’ve got to think about the China business, or Greater China, is a crucial part of our ambitions going forward. Ex-Hong Kong, we are a marginal player in Greater China. With Hong Kong, because we’re the number five or six bank in Hong Kong, we can be a really meaningful player in greater China.

ED: But why not be in China and work that through – I mean, between being in Hong Kong and China and being in China fully?

PG: Because, to me, Hong Kong and China is increasingly an integrated economic system. For us to say, “Okay, get rid of Hong Kong and start as bank No. 100, versus do retail Hong Kong as start as bank No. 30.” The answer’s pretty obvious. You would use the strength that you have and start from there, instead of saying let’s get rid of this and start over. Why would you do that?

ED: So just sticking on your year under review, 2010, another element is that your cost base has creeped up slowly, and we do notice that you put place a number of key appointments in a number of your key businesses. You’ve got very good people on board now and so on. In a way, was that making up for lost time, especially in terms of the people that the bank lost before you came on board?

PG: Actually, I think the answer is a little different. To me, the biggest issue with DBS was what you alluded to in your introduction, which is a lack of clarity around the strategy, the notion of what does DBS really want to be. Once you know what you want to be, then it’s a lot clearer and easier to say, “Do we have the team on board to be able to deliver that vision?” We spent the first three or four months really focused on getting to some agreement between the senior management team, as well as the board, around the first question: what is our strategic agenda, and where do we see the future? Once we had that identified, it became pretty clear that we had good bench in some areas, but we had gaps in some areas as well. Transaction banking, for example, is a large part of what we want to be in the future. We have some substantial gaps in our transaction banking business. Wealth management, for example, is a business we want to build out on a regional basis. There were some very serious gaps in our wealth management bank strength. The SME business, for example, is something that we think we have a natural advantage in, and we want to build out, again as a regional platform. We had some serious shortcomings in the bench we had for SME. So we chose the areas, which were aligned to a strategy, we looked and evaluated the team we had, then made appropriate choices to fill in the gaps.

ED: Give us an idea of your working relationship with your board and some of the decisions you’ve been making.

PG: We have a very professional board, so if you think about the composition of my board we’ve got a lot of heavy hitters. A lot of people think, honestly, that we have a dominant shareholder, so the dominant shareholder manages and runs DBS, it couldn’t be further from the truth. My board comprises Andrew Buxton, who used to be the chairman of Barclays, it has John Ross, who used to be the chief operating officer at Deutsche Bank, it has got Bart Broadman who was 25 years at J.P.Morgan, runs his own hedge fund. Even the Singapore-related people – now, [Kwa] Chong Seng is deputy chairman of Temasek, but he has been the chairman of Asia Pacific for Exxon Mobil for the last number of years, so very professional people. And a lot of seasoned bankers – Euleen Goh ran StanChart for the region, so a lot of people understand banking very strong. As a consequence, the decision making we have at the board is very robust and based on fact and intellectual debate, that’s the only thing that guides our decisions. You wanted an example, so we did the deal with Nikko on our asset management company recently…

ED: Yes, you sold your asset management company recently…

PG: Well, for stock. And the truth is, when I first came up with this idea and mooted it, there was some reservation on the board because they couldn’t figure out what signals it might send into the market if we got rid of an asset management company. It took me one afternoon, walking them through the logic of why our current business was sub-scale, why it wasn’t aligned to our strategic agenda and where we were trying to go, and why the solution I was suggesting was a far better way to play the game. And it didn’t take long for the board to buy into that and figure that that was the right way to approach it and work forward. So the board is professional, the relationship is very very productive, and very positive, and it is driven purely through board interaction. We have a lot of interaction with our committees, our committees are distinct, and by the way they all work through me. So it’s a good, productive and constructive relationship.

ED: Being the new man in the Singapore Inc story, give us a sense of your working relationship with your chairman, Peter Seah – who is really an icon in Singapore in terms of the banking industry, at least – and with your major shareholder, Temasek. When I look at the people you’ve brought on board, some of those people you may not even have known them personally. I know people in Temasek and other parts of the Singapore Inc story who know them better in that sense. To what extent are you able to control the people you bring on board? Are they, as a result of your decision? And to what extent are they a part of a story of your dynamics with what Singapore Inc wants to achieve?

PG: Let me be very categorical. DBS is run very professionally. So far, I have made every management decision that I wanted to with no interference from anybody. I run everything by the board. With the management team, we put together a strategy, took it to the board and said this is what we want to do. The board liked that thinking, they said, “It makes sense. You should go ahead and do it.” I have not been prodded or goaded or encouraged by the board on a single hire. I’ve gone and looked for the people and hired the people and the teams myself. I’m fortunate that my interaction with the chairman is actually very good. It just turns out, happenstance, that his instincts on banking are very similar to my instincts on banking, so most times, and it’s quite ironic, nine times out of ten – if somebody goes and asks him for a view on something, and asks me independently for a view on something, nine times out of ten we have the same response. So we just have very similar instincts. The two or three occasions when we had differences in opinion, he deferred to me every time.

ED: And the people you brought on board – Tan Su Shan as head of wealth management, your Singapore country manager Sim S Lim, KK Tan as your head of retail, Sebastian Paredes as your CEO for Hong Kong – they are all your decisions…

PG: Yeah, Su Shan and Sim Lim I knew from the past. So I just dug into my memory bank for people I’d worked with who might have the right profile for what I was looking for. Sebastian and KK came to me through search firm, I engage search firms. They brought those to me. They were part of my overall screening process. We selected them through a shortlisting processing.

ED: When you put the whole story together, the analysts like you. The analyst reports that have just come out as a result of your first year results are generally very positive. In fact, the perception is that, although your share price doesn’t seem to be reflecting it, they describe it as there’s value in your share price in a sense. Is holding share price one of your goals?

PG: Actually, returns is one of my goals. I’m less bothered about the share price as a measure of success. I am bothered about returns. So there’s reason for our share price being where it is, or our price to book being where it is – that’s because we have underperformed from a return standpoint. Therefore, when you say your share price is holding or what, the reason is that the market needs to be convinced that we have the capacity to produce the returns on a sustainable, long-term basis.

ED: But are you spending enough time with your anchor investors, your institutional investors? Is there buy-in at that front, or do you think that there’s some work to be done to get them on board in terms of where you’re taking the bank?

PG: No, I spend enough time with the investor base, with our institutional investors. I think there’s a high degree of confidence in terms of where we are going. I think part of the thing the investors struggle with is where we are in the interest rate cycle. The truth is everybody recognizes that DBS faces significant head winds in low interest rate environments. That’s just the nature of the balance sheet that I told you about, the $50 billion. That’s a problem which – while we are addressing it and we know how to go about it – is a five, ten-year journey. You can’t wave a magic wand and say, “Balance sheet problem fixed.” So everybody knows that our $50 billion earns very little in low interest rate environments, it starts earning significant returns when rates rise.

ED: So now that you’re bringing the house in order as an organic business, the way regional businesses are going today and international businesses are going today is that you can keep your house in order and still lose the war. That’s because of very strong global themes that are driving the industry. You can’t grow any much further quickly unless you make a major acquisition somewhere, or you make a fundamental shift in the strategy of your business – which you already are by moving more towards fee-based businesses and so on. Give us some big wins that you need to make in order to take this organization to another level?

PG: But another thing, we do – we want to be a major Asian player, and I do believe that we have the capacity to do it in substantial measure through organic growth. We identified countries that we need to be in and grow bigger. We’ve identified lines of business that we need to be in and grow bigger.

ED: But some of those countries, China and India, you are talking about incorporating in those countries. That is capital commitment. Again, it’s organic.

PG: Actually, yeah, China we’re already incorporated, by the way. India is something we’d like to consider. Yeah, but it’s organic. There’s a point I’m trying to make to you. I don’t believe that the only way to produce an efficient, effective banking business is to go and buy something. I come from a bank, which in Asia ex-Korea and Japan, has not make a single acquisition, and it grows very nicely. It grows organically. It grows year after year by retaining a 3%-5 % market share in country after country. It’s a fantastic franchise. So what’s wrong with a 3%-5 % market share franchise in a series of countries growing 1.5 times GDP? It’s actually a very good business model. There’s nothing wrong with that.

ED: But right in front of you, there are two pretty girls sitting that are asking for attention. You have Danamon Bank in Indonesia, and the question in the marketplace is that if DBS needs to increase its asset base substantially, that would be a natural acquisition. There is OCBC in Singapore where there should maybe be greater consolidation. There’s no reason why DBS shouldn’t be looking at OCBC, for example. Aren’t these questions right in front of your eyes? Are these questions that are plain in your mind and, at some point, are you going to be making decisions on them?

PG: Sure. I look at all options and all questions. But I’m a firm believer, Emmanuel – unlike most commentators, perhaps yourself – I don’t believe adding assets is the recipe to running a successful bank. Says, “Oh, my god, there’s a lot of assets, let’s go get them.” So what? What does that do for you? So I think running a successful bank is being able to make sure you’re positioned well and drive good shareholder returns. So, to me, whether it’s a bank in Indonesia or a bank in Singapore, it makes sense to do only if we can figure that at some value at the right price it is going to be creative and going to position the bank well for the shareholders.

ED: Okay. Let me put it to you another way. If your board came to you and said, “It’s time to take it to the next level and look at these acquisitions,” would you resist them, would you play along with them or would you give them an alternative view?

PG: Well, I’ve always said that for me an acquisition strategy must, on any acquisition, satisfy three conditions for us. Number one, it should be aligned to our strategy, so if the board came and told me “there’s a fantastic acquisition, let’s go buy a bank in the US”, I’d say I’m not doing it, because it’s not aligned to my strategy, right? So if somebody came and told me, “Let’s go buy this whole asset management company in Asia”, it’s not aligned to my strategy. So it must be aligned to my strategy, number one. Number two is that it should be accretive, it should create shareholder value. So if the board came and told me, “Why don’t we buy this thing and, you know what, it’s going to dilutive for the next five years, but so what”, I won’t do it because it’s got to create shareholder value. Third, we’ve got to be intrinsically capable of integrating and bringing value to the acquisition, which means either revenue synergies or cost synergies, but we must know that we have the wherewithal to drive value creation. If we cannot drive value creation, and are just aggregating and moving it from one shareholder to another shareholder, there’s no fun in that game, right? If all those three conditions work, which means that there’s an opportunity which is priced right so that we can create value, it’s accretive, then sure, why not.

ED: Well, even as you appear to be very organically driven, a number of your peers are becoming regional and have put a lot of money up front to try and build regionalization. I mean, in Malaysia, for example, you’ve got CIMB Bank and Maybank, that have become regional, in a way. It’s not that DBS would not grow substantially, but a number of your peers would catch up to where you are. How do you look at your peers at so-called regional banks in the region?

PG: We’re very uniquely positioned. Think about all the regional banks in Asia. All the North Asian banks have a North Asian footprint, the Koreans, the Taiwanese, the Chinese, the Hong Kong banks – they only operate in Greater China and Korea. All the Indians subcontinent banks are Indian plays: ICICI Bank, HDFC Bank, SBI, they’re fundamental Indian plays. The couple of banks I mention here are in two or three countries in Asia. There is only one bank in the Asian diaspora today that is well-represented in all three broad axes of gold in Asia, and that’s us. We have a strong Indian position. We will soon be the fourth-largest foreign bank in India. It is the third-largest business in our group. So it’s a strong Indian position. We have a strong Greater China position, that I told you, anchored off Hong Kong. We have a strong anchor position out of Singapore. There are very few people who are positioned to play the Asian integration game as well as we are. So we’re really fundamentally distinguished from any of our Asian competitors in that regard.

ED: But then you do have an ANZ, for example, which has sort of become a Pan-Asian institution. So what is your sense of an ANZ?

PG: Well, the ANZ are not different from Stanchart or HSBC or Citi. So there are three and half, let’s say, global banks, who are Pan-Asian institutions. In this too, their pan-Asian presence is very good. Where we can compete differently from them is the depth of our business. So most of the global players, while they have the breadth, they suffer from two handicaps. One, they don’t go deep in the markets. They tend to be top-end banks, whereas we have the underwriting skills and capacity – and, frankly, the risk appetite – to go much deeper in the markets in which we operate, almost like a local bank. The second differentiator is that most of the global banks tend to run product-centric businesses, they run down product chains. They’ve got fixed-income business and equity business and so on and so forth, not customer-centric. We generally run a customer-centric business because we value our customer relationship as a relationship. What that means in practical terms is that we’re prepared to do loss making businesses with customers provided the relationship on the whole is profitable to us. Would you try doing that with a global bank? The fixed-income guy won’t do a deal if he’s not making money and neither will the equities guy or the transaction services guy. It’s a very different model.

ED: Yeah, in fact, you’ve spoken about this in the past in terms of being the bank that sort of connects the dots in terms of Pan-Asian trade, for example. Where are you with that? I mean, the intention is there, but in terms of translating that into reality, what are you learning in terms of what’s happening in Asia? PG: We are actually making very good progress. I think we can make a lot better progress, and I’ll tell you why there are some gaps in where we are. We are making good progress, because if you look at where we gaining traction, it is with the new Asian MNCs, the Asian multi-national corporations going overseas. That actually includes some middle market names as well. So in China, it’s the Chinese companies coming out into the region that we are making the maximum progress with. We’ve doubled the number of customers we have in China who are coming out, and doubled our revenue base from those customers. Similarly, the Taiwanese going into China. The Indians going into Indonesia. The Singaporeans being around the region, that’s our natural customer base. Last year, a large part of the traction we had on our institutional banking business really came from pursuing this customer base around Asia. So, anecdotally, and based on the way the numbers are, it’s quite clear to us it’s the right strategy and we’re making progress with this strategy.

ED: But the numbers didn’t show in the 2010 figures.

PG: Of course they did. Our total institutional banking business grew 11% year on year. We grew 20% plus in loans. And if you unpeel the onion and see where did that growth come from? That came from exactly this customer profile.

ED: But that’s book building – more of getting into the game rather than actually becoming a strategic player in that sense. The thing is that in transaction banking, you’re building from a very low base. You’re building your customer base. If you just refer to your Chinese customers coming out, you can’t really compete with the Chinese banks supporting a Chinese customer, in terms of pricing, unless you are aggressive in your pricing.

PG: I think you’re missing the point. The reason the Chinese customers coming are deal with us is because the local Chinese banks cannot help them when they come out to Hong Kong, when they come out into the region. Frankly, if I try to compete with the local Chinese banks in China, I’m not consequential. Why would a Chinese company really deal with me? He’s quite happy going to one of the big four Chinese banks. But when these guys want to come out through Hong Kong, when they want to do trade financing and trade settlement in the Hong Kong market or in the Singapore market, the Chinese banks can’t help them. So they come to us. That’s really what’s driving our business. Now you say our transaction banking business is small. Think about it – transaction banking is both cash management and trade finance. Our trade finance business is very big. That’s what anchors our growth today. Our cash management business is nascent. It actually is a decent business in Singapore, but around the region it’s a young business. So that is something we are investing in, both in terms of technology and product capability to build out. I said there’s a couple of things we need to do better. One is that we just put in place a measurement framework in the course of this year, which is a regional measurement framework. So how do you track customers across boundaries? How do you track customer performance regardless of the country in which they operate? We have just put that in place. So making that work – making that beddown, evaluating and compensating and rewarding people on that metric – is work that we really have to get more traction on this year. The second is cash management. If you think about our regional activity, we’re very strong in trade, we’re very strong in regional lending capability, we’re very strong in treasury products – exposure management, etc – we’re not that strong in regional cash management. So that is the business we’re building out in the course of this year so that can supplement our trade and treasury capabilities with a strong cash capability, which then allows us to give a full suite of solutions to these customers.

ED: Notwithstanding the intention, the customer comes to you because, at the end of the day really, a lot of these relationships are credit driven. The customer comes to you because of pricing, even in trade, for example.

PG: No, no, no, no, no. The customer comes to us for two reasons: number one is credit, not pricing. So the capacity to give credit is distinct from the price at which you give credit.

ED: That’s correct, yeah.

PG: A lot of customers come to us, too, because we have the risk capacity and the balance sheet appetite to get into the game. That’s the cutting edge we have.

ED: But the nuts and bolts of it, the transaction infrastructure, you’re still in the process of building that. PG: In trade finance, we have a very good infrastructure. So you think about our trade capabilities. They are superior to almost anybody in the market. We do traditional letters of credit and bills. We do trade financing. We do factoring. We do warehouse financing. We do commodity exposure management. We do the whole slew. So the customer will come and tell me, “You can manage my trade flow right from the farm gate to the factory of my customer, including the shipping, the logistics, the warehousing, better than any other bank can.” So in trade, I don’t think agree, I think we have a very strong infrastructure. On cash, we’re building it.

ED: Final question: being a consummate consumer banker, who is probably one of the few left who is going to be building his business organically first, what is your sense of what’s happening globally in terms of some of the new regulations coming out of the US and the UK, where regulators are coming down on what banks can do in terms of responsibility towards consumers, in terms of building your fee-based business, in terms of the risk that you take on your book, separating your proprietary position with what you do for clients and so on? With all these restrictions coming on board, is it fun being a commercial banker?

PG: Absolutely. I love banking. And I think that there’s as much opportunity in banking going forward as there’s ever been. At the end of the day, banks have two or three fundamental roles: we intermediate risk, we intermediate liquidity, we intermediate maturities. You need somebody to do that role. It doesn’t disappear or change. And the fact that the rules are changing, some of those rules are overdue to change. But that’s something you live with and you work with. In our context, some of the big things that are changing, which have impacted a lot of the global banks – the Volcker Rules and Frank-Dodd – is in prop trading. The prop trading is not a large component of the business for a large number of Asian banks, including ourselves. So it doesn’t materially impact what we do. What does impact us is Basel-related stuff, which is capital and liquidity. Fortunately, all the Asian banks were well ahead of the game in terms of capital. So, while we have to be cautious about capital, we don’t have huge capital catch up to do. In fact, we believe we’re already ahead of Basel III requirements today. Liquidity is the one thing that we’ve all got to watch out for. Now, the liquidity guidelines are still moving around. But that is something that might be a change that will give us food for thought.

ED: Piyush Gupta, thank you very much.

PG: Pleasure talking to you.

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