After a 9 am analyst meet and a series of interviews to channels on a Saturday, Bank of Baroda chief PS Jayakumar is relieved to be out of the camera's glare.
“It (off-camera interviews) make it a lot easier,” Jayakumar says as we take our seats for an interview at the Bank's corporate office in Mumbai’s suburban commercial centre - Bandra Kurla Complex (BKC).
A former Citibanker and entrepreneur, Jayakumar (56), is happy to talk about the bank's 160 percent year-on-year profit growth and improvement in asset quality in the first quarter. The results were announced on July 27.
“Although I believe we must talk more when the results are bad. This gives more confidence on what right we will do going forward,” he says as we discussed several issues, including what went right for Bank of Baroda in the first quarter of FY19, his tenure, which is about to end, and the contentious issue of merging public sector banks.
To merge or not
Jayakumar joined Bank of Baroda on October 2015. He was joined by former chairman of Microsoft India Ravi Venkatesan, who took over as the bank’s non-executive chairman. Bank of Baroda had just been hit by the Rs 6,172-crore remittance scam.
Jayakumar, who took a pay-cut to take up the CEO & MD position, feels there was a period of time when Bank of Baroda missed catching up to its private peers, but “we are getting there now. A fresh pair of eyes always helps”, he says on the proposition be brought on board.
At a sectoral level, he believes India has a number of banks which are niche and have their own local community businesses. In an overall industry sense, we have probably too many banks and a merger might help conserve resources and talent, Jayakumar feels but adds there is another argument that maybe it is the right thing to do but not the right time.
“What we ought to look at is that either the banks are specialised or need to be scaled up, both are opportunities. If we do not have these two combinations…then the question is —can a differentiated proposition be made or is it appropriate to merge? Now you can decide that, till the cows come home,” he quips pushing aside the flick of silver hair from his forehead.
As for Bank of Baroda, he wants to strengthen its core to increase its ability to absorb other banks. “Second, we need to build scalable architecture that can help us to work with a merger in an efficient manner without being disruptive. We also need to sensitise our people to accept and accommodate different cultures and views,” he says. But before one can ask him about any merger on the cards, he immediately diffuses the thought away.
What went right for Bank of Baroda in Q1?
Taking a leaf from his favourite book “The Man Who Knew Infinity” — a biography of genius Indian mathematician Srinivasa Ramanujan — Jayakumar looked closely at the non-performing assets (NPAs) and checked for patterns to improve most operating parameters of Bank of Baroda.
Some of the numbers reflect the change. Although the economic cycle changed in the past three years, with NPAs shooting up to over Rs 55,000 crore from Rs 23,000 crore as on September-end 2015, Bank of Baroda’s cost-to-income ratio has improved to 45.63 percent from 46.75 percent.
Operating profit growth is at 13.5 percent, substantially higher from a degrowth of 2.7 percent. Return on assets is also higher at 0.29 percent as on June end 2018 from 0.07 percent as on September end 2015.
Quarterly fresh slippages or additions to bad loans have more than halved to Rs 2,868 crore as compared to Rs 6,816 crore.
“Now, we have a watchlist of potential NPAs of about Rs 8,500 crore but we will contain at those levels with some slippages further combined with recoveries,” Jayakumar says.
The controversy around South Africa's politically influential Gupta family may have led to Bank of Baroda, which was one of the bankers to the Guptas, closing its business in the country, and some other locations. But Jayakymar is still bullish on the overseas business.
The bank is growing its international book (over 20 percent of total business) in locations with upcoming business opportunities like the Indo-Korea trade or Indo-Japan trade.
“(We are) looking at these locations to reach out on account of changed economic relationships, nature of assets and businesses are also changing like the LoUs (Letters of Undertaking).
“So, our balance sheet is declining but revenues are going up. We have an NPA problem but have extremely high provision coverage ratio (PCR at 59.94 percent, up from 58.42 percent in March). Also, companies are becoming more global now where they need local banks, so there is good room for growth,” he says.
The banking veteran says that Bank of Baroda is beginning to see the results of the transformation journey it began.
“We worked on processes, customers are seeing lot of value because we are providing more options to them. We have also done a lot of work in the training and development (of employees),” he highlights adding that at the end of the day, there are still lot of challenges we need to work upon.
What are these challenges?
“One is the environment itself keeps changing. Second, we have a lot of senior officers and general managers retiring in the coming days and third, a lot of catch up, although done, in technology space but also increase competence through that and build a bank for the future,” Jayakumar points out.
Talking about the future, he says the objective is "how to ensure more time of my colleagues, our employees, is used to spend time with clients and give better advice."
He adds: “There are two ways of doing it — one is get the process digitised and automated, also improve customer service and delivery, predict what the customer wants, ensure lesser complaints, that is the biggest driver for business.”
He wants the amount of time spent by employees on sales to double from the current 10-15 percent in the next 2-3 years.
But will he be in the bank to see that given his three-year term is set to end in October this year? If not Bank of Baroda, will he choose to go back to his founding enterprise Value Budget Housing (VBHC), in which he still holds stake, or take up Axis Bank CEO position where he is speculated to be one of the shortlisted candidates? Jayakumar has refuted the speculation so far.
“There is still some time. Government is conscious of BoB’s succession plan and I am committed to this institution. If there is something more that needs to be done from my side, it is understood, I am there,” Jayakumar says pulling off a weary smile.