MUMBAI : At a time when foreign banks are slowly making headway in India and reassessing growth prospects in certain segments, Deutsche Bank in Germany is looking to expand across all sectors in which it has a presence. India is the only market outside of Europe where the bank has a retail presence. In an interview with Mint, Alexander Von Zur Muehlen, Asia Pacific Chief Executive, explained why environmental, social and governance (ESG) is an opportunity and not just a necessity that needs to be managed differently in this part of Mint the world. Edited excerpts:
How do you see the growth opportunities in India?
India has exceeded our expectations in recent years. The services we offer within India are north of what we currently offer at the group level. Deutsche Bank in Asia Pacific is also performing very well, offering a higher return on equity than at group level. Due to the increasing number of multinationals from this part of the world, cross-border banking services are required, be it from a hedging or financing perspective, transaction banking will come into play. This is the bridge to Europe or Intra-Asia or America. The Indian franchise has been very good for us and we have big ambitions to grow it in the years to come. We have over 14,000 employees here and India is the only country in the world outside of Europe where we have a retail banking franchise. We also have many group-wide technology and operations service capabilities that we operate out of India.
Are you planning to expand your activities here?
Prudent risk management is extremely important for any bank and I mention this because our risk provisioning in India has been very low over the years. Our activities, including retail banking, have been very strong across the board. Thanks to prudent risk management, we safely navigated through challenging market environments. We are reviewing expansion across all entities, including the high net worth and private banking businesses, as well as corporate and investment banking. We are committed to growth and have raised approximately $1 billion in capital into the Indian entity over the past three years and we look forward to further growth opportunities.
Are you reducing your exposure to Russia?
We feel comfortable with our direct and indirect exposure to Russia, as we have significantly reduced our exposure there in recent years. The bank has been very focused on serving our multinational clients, including German well-known names, in relation to their activities in Russia. As a result, our local exposure was very subdued from a credit and currency perspective.
What are your thoughts on ESG, especially in India?
We see ESG not only as a necessity, but also as an opportunity. Financial markets around the world are aligning with this, and the reality is that ESG considerations are increasingly becoming the focus of operating permits. In this part of the world, ESG requires a lot of transition work. There are requirements for new products, advice and a different approach to financial markets. We want to embed ourselves deeply in this transformational journey with our customers. It is not helpful for a client, investor or bank to look at a black and white system to categorize a company as ESG compliant or not. We need to recognize that in emerging markets, the work that needs to be done for the transition is bigger and more complex. We are very committed to this and have dedicated ESG efforts for the region. On the surface, ESG in Europe focuses on the “E”, but in this part of the world it is more than that.
Do you think India can become a manufacturing hub in the coming years?
India will also be a big beneficiary of supply chain migration as well as diversification. We’ve seen the world talk a lot about it since the advent of Covid-19. We also recognize that in certain industries so much has happened and logistical hurdles had to be overcome. But when we look at how the Russian war in Ukraine has impacted the supply chains of multiple industries, it speaks as much to the case for exodus as it does for alternative locations. Of course, in many industries these alternative features will increase costs, but you must have them. When you think of production-intensive operations, there aren’t many sites that can produce at a certain rate given a certain quality and quantity. If you’re looking for truly absorbable capacity, there aren’t many markets, and India is one of them.
How is Deutsche adapting to the ever-changing regulatory landscape in this part of the world?
I don’t think regulations are meant to make life easier for financial sector companies and it’s part of our business to understand the changes. Let me give you a very different perspective on local regulations, not just for India but for Asian economies as a whole. In view of the regulations, most of the banking products have to be carried out not only by us, but also by the customers with comprehensive examination and reliability. Anyone can and anyone makes banking products in the US and Western Europe. Doing this in smaller and emerging markets, where regulations sometimes change on a daily basis, is almost an art. It requires you to really keep your feet on the ground. It is the USP for banks to do it right, to really know the way.
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