Fabric of India: Percy Batliwalla talks to TFR about client centricity in challenging times

Face to face | 14 January 2016
PERCY BATLIWALLA.jpg

Having found trade finance solutions to Asian crisis restructurings, Percy Batliwalla had demonstrated its resilience and innovation in banking. He talks to TFR about client centricity in challenging times

When Percy Batliwalla took over the trade and supply chain baton from Bank of America Merrill Lynch's (BofAML) industry treasure Bruce Proctor, in July 2015, many observers (including those of us here at TFR) wondered how on earth this 26-year legacy was going to be nurtured.

The short answer is nobody needs to worry. And while this understated career banker may not have dominated the speaker and industry panel circuits, his passion for shaping the business from a client-centric perspective is written all over him.

Bombay

Batliwalla was born and brought up in the former Bombay, "somewhere along the line it got changed to Mumbai", he reflects. This actually happened in 1996, when the government renamed the city after the Koli goddess, Mumbadev, as part of a move to step away from British colonial names.

Batliwalla had, from an early age, been interested in economics, and how global markets actually worked. His father was an engineer in the textiles sector, which to this day represents around 12% of India's exports. It seemed fitting that the Bank of America Merrill Lynch global transaction services and corporate banking team happened to choose the V&A's exhibition on Indian textiles, The Fabric of India, as the venue for its 2015 year-end client reception.

In the mid-1970s, career choices were, said Batliwalla, "nice stereotypes", and of the three to choose from - "science, commerce or arts", he opted for commerce - after all he had grown up seeing one very important area of it in action.

This involved making the decision to train as a chartered accountant with the Institute of Chartered Accountants India (ICAI), and the three-year course, along with the subsequent internships with a local firm affiliated with global accounting and consulting giant EY, provided the foundations of what would ultimately propel him into the banking sector.

"When I was doing my articleship, we covered assignments with a number of financial institutions related to audit, tax work and consulting. These included a couple of banks in particular," he reflects. He was handling a significant account for the firm - American Express Bank (as it was called then) and joined them post-qualification in their audit team.

Out of a suitcase

The bank's audit team covered the whole of Asia Pacific. "We had to go from country to country and live out of a suitcase. This was very interesting and not only gave you a good perspective of how transaction banking was done but a perspective of the world - which varied enormously from one part of Asia to the next."

He recalls the surprise during one audit in Korea when the local team became quite upset that he queried the standard practice of a "dojang" or a South Korean seal (stamp/chop) being accepted as a legal equivalent of a signature. "You could walk down the street and get one made."

I ask if fraud was ever a problem he encountered in his work there.

"Not that I recall, but this was in the days when, even in Seoul, not many people spoke English". While South Korea was still an emerging economy in 1994, it has since, of course, evolved into a highly developed economy, with corporates such as Samsung as shining examples.

Trade as a restructuring tool

By 1995 Batliwalla had transferred to the corporate banking part of American Express where he covered the whole range of corporate banking offerings including trade finance. "In those days we did everything from plain vanilla loans, to debt instruments, to structured finance and corporate finance."

But as the bank did more trade business with the major Indian businesses, it took the strategic decision to set up a more specialist trade business. "I wanted to do something different and have always enjoyed building businesses," he says. The first stage was to head the bank's trade business for India and South Asia from India, and this was followed by a move to Singapore (where Bruce Proctor had spent much of his career).

The timing was sheer bad luck. In July 1997 the Asian financial crisis started to unfold. Although the main victims were Indonesia, Thailand and South Korea, the loss of demand and confidence did affect China, Singapore, Brunei and Taiwan.

The task in hand was to grow the business, however given the timing it also encompassed recovery of loans and assets that had been caught up in the crisis. "The work was a complete eye opener and I think this is something every banker needs to go through. It is very easy to give money, but much harder to get it back", reflects Batliwalla.

Currency markets had failed in Thailand once the government stopped pegging the baht to the US dollar and other currency declines in South Asia resulted in falls in the stock market and reduced trade. Although some loan recoveries were pretty straightforward, others had to be worked out. "We used to get a lot of loans converted to trade and we used trade instruments to recover our money", he explains.

While research such as the ICC Banking Commission Trade Finance Register1 demonstrates that across 2008 to 2014 short-term trade finance has had default rates (0.02%) that only reach around one-fifth of comparable Moody's default rates for the investment grade rating universe (0.11%), this was not available during the post Asian contagion recovery period. So, banks such as American Express were finding this out for themselves on the ground. Batliwalla said that the use of trade instruments in the recovery process was "a very telling experience as this really showed the value of trade and while everyone talks about its low default rates, this was really the proof".

Once the loans were converted into trade transactions, each cycle yielded its slow repayment. The whole business of extracting the lending institution from the working capital cycle took a huge amount of skill and patience. If one corporate misses a few payments and gets into a working capital problem, the decision for the restructuring bank is to convert the loan into a working capital trade limit and use export collections/letters of credit and attach trade assets to the loan. This was done gradually to allow the stricken borrower to stagger repayments. Once the LC was in play, the bank would keep around 10% to 30% of the export payment proceeds and then issue a new letter of credit.

"Once repayments are linked to trade, they are linked to the lifeline of the corporate," observed Batliwalla.

By 2002, American Express Banking was not quite the same bank he had joined - it eventually sold all its private banking and financial institution assets to Standard Chartered in March 2008 for US$823m and it had started a restructuring process.2 Now back in India, he joined GE Capital in a non-trade role as corporate finance sales head managing its business for western and southern India. "This was an interesting stint," said Batliwalla, The financial services arm of US conglomerate General Electric (GE) had been in India since 1902 when it installed India's first hydropower plant. While divestiture of GE Capital from GE is almost complete (with around US$32bn of its commercial lending and leasing businesses destined for Wells Fargo), GE Capital was very active in India supporting suppliers to its engineering and power projects and recovering distressed loans in 2002.

Cash management and transaction banking

In 2004, like many who have been interviewed for these profile pages, his next move was the result of a personal contact.

"I got a call from someone I knew in Singapore saying that J.P. Morgan was looking for someone in cash management and was I interested?" It all sounded very promising although at the time transaction banking wasn't something he had been doing a lot of. "I met the people and it was a very impressive team so I decided to join them."

He first ran the business for India and South Asia and in 2007 given his success in the role was promoted to run the treasury sevices business for financial institutions for the Asia Pacific region.

"A number of the markets we were covering were emerging markets and in those days J.P. Morgan was really the lead franchise as far as financial institutions were concerned," he said. Although the bank had a significant market share, he did deliver further growth, but by this time, once he had built out the business further, it was time for a fresh challenge.

In 2010, thanks to a former J.P. Morgan colleague who had moved to Bank of America (around the time Merrill Lynch was being acquired), he was persuaded to hear how the bank also wanted to grow its business - although he was not really looking to move. By May of that year he had taken up the role of head of Asia Pacific, financial institutions, treasury sales based in Singapore with a mandate to grow the firm's market share in providing treasury services to Asia Pacific-based bank and non-bank financial institutions. Thereafter he was elevated to manage transaction banking sales for both corporates and financial institutions for the Asia Pacific region.

From this essentially APAC role, he transitioned into taking on global transaction banking sales. This drew on his experience of appreciating how different parts of the world buy global transacton services and how expectations vary from region to region. Many US-based BofAML clients were developing international businesses

What the clients want

As the interview draws to a close I ask how the bank responds to the basic problem - very much a theme at Sibos - that sticking to track record borrowers is holding back trade. Volumes of lending are down across the board and the message was the same from all the big players - the strategy was to deepen existing client relationships rather than take the reputation risk of developing new ones in emerging markets.

Not surprisingly, the issue is neatly sidestepped. "A couple of years ago the bank took a very clear call on what business it wanted to be in and what sort of clients we wanted. We develop relationships with clients where there are opportunities across multiple products - this has always been our strategy," he says.

There are no deviations to this approach to selecting who they want to continue banking in each country. "From a markets and volume perspective the values are down because of commodity prices, however, our volumes continue to grow" so the preferred client profile continues to be large US corporates and multinational corporations developing their international businesses and attractive mid-caps. In fact this is the area that is growing fastest for the bank. "Our mid-market clients have an increasing amount of cross-border trade business," observes Batliwalla.

Clients, he adds, are "looking more towards integrating working capital solutions". They want convergence of cash, trade and foreign exchange rather than three different sets of conversations.

"If you take a step back, you ask a client what their challenges are and find a solution. You don't ask what product they want. We see this as a core development and have realigned ourselves to meet those needs and are investing heavily in this convergence."

As for digitisation, like other forward-thinking transaction banks, it's part of business as usual and not some new development that requires a reaction. "Digitisation is core to the way we think about our business. Not just until the end of tomorrow but out into the future," he concludes.

I ask how he feels about 2016 and a large smile appears. "I am feeling very upbeat. I love what we do here," he beams. And he is looking forward to relaxing with his family during the festive season, having relocated to New York to take up the global head of trade role, his family will be enjoying some very different celebrations from those they would have had in Asia. I wanted to ask if they would be ice skating in Radio City, but we were out of time.

Percy Batliwalla was talking to Clarissa Dann

Box-out 1

Career profile: Percy Batliwalla

Current role

Head of global trade and supply chain finance, BofAML

Previous roles

2013-2015 Managing director and head of global sales, GTS BofAML

2010-2013 Head of Asia Pacific GTS sales, BofAML

2004-2010 Various roles at J.P. Morgan culminating in head of Asia Pacific financial institutions - banks

2002-2004 Head of corporate finance sales, western and southern India, GE Capital

1994-2002 Corporate banking, corporate finance, structured trade and corporate audit roles at American Express Bank

Percy Batliwalla is a chartered accountant and an associate member of the Institute of Chartered Accountants in India, was a member of the BAFT Asia Regional Council from 1997 to 2015 and is currently a member of the BAFT Global Trade Industry Council

"Once repayments are linked to trade, they are linked to the lifeline of the corporate"

References: 

FACE TO FACE: PERCY BATLIWALLA

Already registered? Login to access premium content

Give Feedback