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Not a takeover but only an investment — HSBC CEO

By Our Special Correspondent

CHENNAI DEC. 5. UTI Bank is inclined to accommodate HSBC men on the board of the bank.

HSBC, it may be recalled, picked up 14.71 per cent shares in the bank from a couple of private funds — the CDC Financial Services (Mauritius) Ltd. and the South Asia Regional Fund, for a consideration of Rs. 306 crires. It has also an option to buy an additional 5.37 per cent from CDC Financial Services for a consideration Rs. 112 crores. In an interaction with presspersons after inaugurating the Anna Salai branch here today, Chairman and Managing Director, P. J. Nayak has sort of veered round to accepting the entry of HSBC representatives on the board. After all, CDC men sat on the board, he pointed out.

Quizzed if he saw anything hostile in HSBC move, Mr. Nayak said he would rather believe what Niall S.K. Booker, HSBC India CEO said. Mr. Booker had claimed that, "it (HSBC buying the bank shares) is not a takeover but only an investment". To a question, he said HSBC had to make an open offer price to comply with the SEBI (Securities and Exchange Board of India) takeover guidelines. Since open offer price of Rs. 90 per share was much below the ruling market price, he did not foresee anybody coming forward to sell his/her shares.

Mr. Nayak said the bank itself felt the need for a strategic investor and, hence, went to CDC couple of years ago. "We do no need any further equity in the medium term," he asserted. He claimed that the CDC men on the bank board had strong banking experience and gave vital inputs to beef up the strategic capability of the bank.

The CMD was of the view that the `India business' of the two banks — HSBC and UTI Bank — was quite different from each other. The UTI Bank, he said, had deeper penetration and stood stronger vis-a-vis corporate lending. HSBC, being a foreign bank, had its own constraint. "Our objective is to quickly move in to establish presence in every district headquarter within three years," Mr. Nayak said.

Asked if the current shareholding curbs on a bank to hold shares in another bank required a change to facilitate consolidation, the CMD said the regulator had to take a view on this based on global experience.

Fielding a volley of questions, Mr. Nayak said retail lending of the bank formed 20 per cent of the total lending of around Rs. 9000 crores.

About 17 per cent of retail lending was in housing finance, he pointed out. "Though retail lending is growing, the bread and butter for the bank is corporate lending".

The CMD said the re-organisation of the past few years had seen Corporate India turn efficient and, consequently, rely less on working capital. Nonetheless, he saw opportunity in the general economic uptrend. In this context, he said auto component, pharmaceuticals and chemicals were doing well. In his reckoning, companies were now beginning to use up the excess capacities that had been in the early 90s. He was hopeful that the engineering sector, which was yet to show a pick up in credit offtake, would see an improvement.

To a question, Mr. Nayak defended the banking sector for booking profits through trading in government securities. He regretted that critics of banks did not look at the supply side of government securities.

The sterilisation operation of the Reserve Bank of India to reign in the appreciating rupee had seen the supply of government securities increase. With interest rates heading south, banks saw in them a good opportunity to book profits.

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