Bombay : At a time when foreign banks are slowing down in India, reassessing growth prospects in some segments, Germany’s Deutsche Bank wants to expand in all vertical markets where it operates. India is the only market outside Europe where the bank is present. In an interview with Mint, Alexander Von Zur Muehlen, its managing director for Asia-Pacific, explained why environmental, social and corporate governance (ESG) is an opportunity and not just a necessity, which must be managed differently. in this part of the world. Edited excerpts:
How do you see the growth opportunity in India?
India has exceeded our expectations over the past two years. The services we provide in India are north of what we currently have at group level. Deutsche Bank in Asia-Pacific is also performing very well and delivering a higher return on equity than we achieve at group level. Due to the growing number of multinational corporations from this part of the world, there is a need for cross-border banking, whether from the perspective of hedging or financing, transaction banking will come into play. This is the bridge to Europe or intra-Asia or the Americas. The Indian franchise has been very good for us and we have great aspirations for the coming years to be able to develop it. 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 service capabilities in the technology and operations space that we manage from India.
Do you plan to expand your operations here?
Prudent risk management is extremely critical for any bank and I mention this because our risk provisioning has been very low over the years in India. Our businesses, including retail banking, have always been very strong. Through careful risk management, we navigated safely through challenging market environments. We are considering expansion across all units, including affluent retail and private banking businesses, as well as corporate and investment banking. We are eyeing growth and have infused approximately $1 billion of capital over the past three years into the India unit, and look forward to further growth opportunities.
Are you reducing your exposure to Russia?
We feel comfortable with the direct and indirect exposure we have to Russia, as we have significantly reduced our exposure there over the past two years. The bank has been focused on serving our multinational clients, including big German names, in their business in Russia. As a result, our local credit and currency exposure has been very limited.
What do you think of ESG, particularly in India?
We see ESG not only as a necessity, but also as an opportunity. Financial markets around the world are bracing for this and the reality is that ESG considerations are becoming increasingly central to the license to operate. In this part of the world, ESG requires a lot of transition work. There are demands for new products, advice and a different approach to financial markets. We want to anchor ourselves deeply in this transformational journey with our clients. It is not useful for a client, investor or bank to look at a black and white system to classify an entity as ESG compliant or not. We must recognize that in emerging markets, the work that needs to be done for the transition is greater and more complex. We look at it very dedicatedly and for the region we have dedicated ESG efforts. If you look at it superficially, in Europe ESG focuses on the “E”, but it’s more than that in this part of the world.
Do you think India can become a manufacturing hub in the years to come?
India is also going to be a big beneficiary of supply chain migration as well as diversification. We’ve seen the world talk about it a lot since the emergence of covid-19. We also recognize that so much has happened in certain industries and logistical hurdles have had to be overcome. But if we look at the effect that the Russian war in Ukraine has had on the supply chains of several industries, that speaks as much for migration as it does for having alternative locations. Of course, having these alternate capabilities will increase costs in many areas, but you need them. If you think about high production activities, there aren’t many locations that can produce with a certain quality and quantity in mind at a certain speed. When looking for real absorbable capacities, there are not 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 companies in the financial sector and understanding the changes is part of our job. Let me give you a completely different angle on local regulations, not just for India but for Asian economies as a whole. The bulk of banking products, given the regulations, must be done with careful scrutiny and complete reliability, not only from our side, but also from the customers. Anyone can and everyone uses banking products in the United States and Western Europe. Doing this in smaller, emerging markets where regulations change, sometimes daily, is almost an art. It requires you to be really on the ground. It’s the unique selling proposition (USP) for banks to get it right, to really know the way.