Whether it is the returns expectations or policy stability, India is at the top of the chart for global investors, said HSBC India CEO Hitendra Dave. The absence of global banks in Indian retail lending and the soaring wealth effect of the Indian middle class have provided a springboard for HSBC India to become the vital lever of growth for the British bank, Dave said in an interview with Bhaskar Dutta and MC Govardhana Rangan. Edited excerpts:
Among global banks, with Citi exiting retail, you are alone in the competitive retail space. What is it that you are seeing that others don’t?
My sense is that there is place for only one international bank to have the ambitions and market-share aspirations of a local bank while continuing to operate as an international bank – be it governance, structure, product, technology, and servicing. What distinguishes us is just the totality of all these things – the aspirations of a local, private bank but operations like an international bank. It is very important to have the emotional connection of a domestic bank. I can’t judge myself, but I think we are that international bank. When you talk to large customers, if you ask them which is that one international bank which is ticking these boxes? I hope most people will say HSBC.
After the global financial crisis, few MNC banks including HSBC, chose to remain in emerging markets retail. What has changed for you now?
What has changed over the last four to five years is the sheer wealth effect in India. We individually feel it, we read about it – how the number of luxury cars is going through the roof, the number of flats is increasing every year, the number of people going abroad for holidays, the number of people buying Swiss watches, luxury handbags. The second aspect is the competitive scenario. There is only one bank today which has a high-street presence in India and the entire English-speaking world. This might sound like a simple line, but almost everyone you know is sending their kids abroad to study. All the people above a certain level of wealth want to have certain wealth outside India – investments in shares, real estate etc. If you really want to emotionally connect with the country, you need to connect with the retail business. We are there – we are doubling down and hopefully tripling down.As global monetary policy turns easier, how will funding through dollar bond markets fare this year?
The bond market is beginning to come back. The good thing is that the market is open for new instruments as well. Just this week we had an asset-backed securitisation. The fact that we could have our first ABS, such as a syndicated loan, and the largest loan for sub-investment grade etc, just tells you that the market is open for India and that is a reflection of the India story today. HSBC was the leading player in the syndicated loan markets in 2023 and we have had a spectacular start in 2024. We were involved in the transaction for India’s largest bank, India’s largest export institution and many other banks. I think year to date in 2024 our share might be 60-70% in syndicated loans.Is India the only game in town?
Whichever way you look at it – if you’re sitting in Hong Kong, Singapore, London, Zurich, or New York, if there is one story where you feel that the risks are very limited, but the upside is quite high, it is India. People are underinvested and they under-own India, so I think it’s a long-term runway there. The base case for 2024 is that we will have the market growing in teens plus, 10-20%, this year versus last year.
The bond index inclusion is here at last. How do you read that in terms of bond investors in general?
One, there are instruments such as Total Return Swaps, which are used by international investors who are not currently registered here. They would like to access the Indian market but do it without going through the process of registration. Interest is coming more from people who are tactically playing the market. The second thing is why would they come? One reason is that if they are measuring themselves against a global index, then to completely not be part of Indian bonds results in them running the risk of not being invested in Indian bonds if they perform very well.
Has the view on inflation and macro policy stability in India eased?
When you have a central bank which is turning out to be way more focused on inflation than anyone thought they would, when a central bank remains more hawkish than where the market expects it to be, you start anchoring long-term yields, because basically the market then says that this central bank will break the back of inflation and inflationary expectations.
So, it’s also monetary policy and changing inflation dynamics which are drawing in foreign funds.
Let’s say we get anchored around 4% inflation. If that happens, and long-term yields are 7.0-7.4%, they start to drop. So, one set of people will come in because they need to measure themselves against the index but the second is where people like us are telling them that whether you track the index or not, you are in the business of making money. You make money when yields come down and when the currency remains extremely stable.
