DEUTSCHE BANK and its

success factors in the context

of Regulation & 4Ps of

Marketing.

SSSIHL, BRINDAVAN CAMPUS

| Vishwas B , Roll No:13214

Introduction

The story of foreign banks in India goes back to the 19th century when the colonial economy

brought with it the need for modern banking services, uniform currency and remittances by

British army personnel and civil servants. The banking institutions were established mainly

because of the growing need for banking services by the merchants who came from the west.

The three presidency banks established by the East India Company would later merge to form

the State Bank of India, Indias largest lender. British owned and controlled, these early banks

are considered Indias first foreign banks.

The first phase of banking reforms, triggered by recommendations of the Narasimhan

Committee in 1991 and the licensing of the new private sector banks through the next two

decades inaugurated an era of change. Meanwhile, the opening-up of the economy to

increased participation by foreign players created greater opportunities for foreign banks to

work with their multinational clients in India.

Foreign banks in India in 2013: A snapshot

As of March 2013, there are 43 foreign banks from 26 countries operating as branches and 46

banks from 22 countries operating as representative offices. A number of foreign banks have

also entered India via the NBFC route, while a considerable number have set up captive centres

in the country.

Foreign banks present in India as representative offices often have correspondent banking

relationships with domestic banks and provide a useful platform for foreign banks to access

opportunities for foreign currency lending to Indian corporate and financial institutions.

The efficiency levels of the foreign banks are generally better than that of the other banks

operating in the country and have lower NPAs , but, because they cater to the same kind of

corporate clients, their risks are correlated and in turn higher .Their Strict Lending norms and

policies allow only a few corporate clients to pass their criteria, so naturally they are

considered niche segment in India.

Foreign banks: Evolution and approaches to banking in India

Due to the local branch regime and the operating model of choice, foreign banks have, for the

large part, remained niche players, focusing on trade finance, external commercial borrowing,

wholesale lending, investment banking and treasury activities. Some large foreign banks have

focused on capturing the retail market but have remained confined to the high end of private

banking and wealth management, while a few others have created valuable niche offerings in

the areas of transaction banking, cash management and remittance products.

REGULATORY FRAMEWORK

Foreign banks that look to do business in India has to face challenges that are unique and

specific to each of the foreign banks in India. For any bank looking to start operations in India

foreign or domestic compliance with stringent RBI regulations is a major challenge.

No differential licensing

Foreign Banks that look to offer unique products and services looking for differential licensing

are forced to apply for universal banking only that mandates all the banks to offer full fledged

banking services in the country.

Financial inclusion

Complying with the RBIs guidelines on financial inclusion requires offering banking products

and services to unbanked and under banked areas and customers. This involves costs that

foreign banks with few branches and fewer sources of raising low-cost funds may find difficult

to implement. It means operating in areas that these foreign banks does not have expertise in,

which leads to more NPAs.

Priority sector lending Foreign Banks are required to lend to Priority sector which is 32% of the Adjusted Net bank credit for

banks having lesser than 20 branches , this figure stands at 40% for banks that have more than

20 branches in India. As already mentioned these foreign banks dont have the expertise in

lending to the priority sector in India. As some in the banking industry said, referring to this

predicament of the foreign banks They know nothing about the price of ploughs. A rule of

thumb is that priority lending cuts bank profits by a fifth. Foreign banks have just 21 ATMs in

rural India compared to 41 foreign banks operating in India with 323 branches and 1414 ATMs.

Setting up a wholly owned banking subsidiary (WOS)

Foreign banks in India operated as branches of the parent bank located overseas. However RBI

had released guidelines for setting up wholly owned subsidiaries (WOS) by foreign banks in

India. A WOS would have to be in the form of a locally incorporated entity. These new guide-

lines will result in banks losing the advantages of a branch structure.

ABOUT DEUTSCHE BANK

Deutsche Bank started operations in India in 1980.It is know for strong client relationships,

highly specialized product technology and global connectivity, all built around strong corporate

governance standards.

Deutsche has established strong relationships with its clients in India in the last 30 years. It has

17 branches across the country in Mumbai, New Delhi, Bangalore, Chennai, Kolkata, Noida,

Aurangabad, Gurgaon, Kolhapur, Pune, Salem, Vellore, Moradabad, Ludhiana and Ahmedabad,

as well as Global Service Delivery Centres in three locations.

Its strength lies in areas such as Debt and Derivatives ;Global Transaction Banking cash

management, trade finance and custody; Investment Banking ,Institutional Equity broking,

asset and private wealth management, retail banking and BPO.

THE 4Ps

PRODUCTS

Corporate Banking and Securities

This includes sales and trading of securities, foreign exchange and derivatives dealing,

corporate advisory, M&A.

Under the Foreign Exchange and derivatives segment it deals in onshore swaps, interbank

interest rate and overnight index swaps, Government Bond Trading it is one of the very few

banks in the country offering such a distinguished suite of services.

In the Corporate banking side it has overlooked various IPOs and M&A transactions.

It offers various cash management services leveraging on its well developed technology,

offering Trade finance products such as account payables, receivables and liquidity

management. It has a group offering dedicated services in trade financing and risk advising.

Private & Business Clients

It offers Current account, loans, deposits and investment

advisory services to Individuals as well as small and

medium corporate clients. It has around 150000 retail

customers in India and it offers its services across its 16

branches in the country.

Asset and Wealth Management

It is one of the countrys leading wealth management

companies. Its main focus in this segment is to offer

innovative financial planning and investment products and

services to the High Net Worth individuals in the Country.

PLACE

Deutsche Bank has 17 branches in India located at Mumbai, New Delhi, Bangalore, Chennai,

Kolkata, Gurgaon, Noida, Aurangabad, Kolhapur, Pune, Salem, Vellore, Moradabad, Ludhiana

and Ahmedabad. it also has its Global Service Delivery Centres in three locations. One of its

core competencies comes from its global expertise, technology driven operations and its local

tie-ups. It has several service centres in India, GBS service centres which was set up in 2006 by

DBOI Global services which is subsidiary of the Deutsche Group Company to leverage on Indias

operating infrastructure and Qualified and talented Workforce to support its global operations

across various areas of Services and products the bank offers. These service centres are

strategically located in India at Jaipur, Bangalore and Mumbai.

PROMOTION

It has placed itself as an innovative, performance oriented, leading global financial services

provider in the world. Its mission statement says We compete to be the leading global

provider of financial solutions, creating lasting value for our clients, our shareholders, our

people and the communities in which we operate.

One of their main links to the customers is Relationship managers; Productivity of these

relationship managers is their biggest focal point. Customers especially the HNIs which the

Figure 1: Deutsche Bank's segment wise revenue Share.

bank focuses on are least worried about the number of branches the bank has in the country

they look for Brand Image and Investment Expertise and services and Deutsche Bank stands for

that.

To ensure that customers remain loyal to the bank, they encourage customers to look for value

additions to the products and services that they provide. Their managers make a point to visit

any clients where they are unhappy with their service or where they have lost money; this in

turn gets a lot of referrals to the bank and in a market where its clients are mostly HNIs even 1

referral by a client makes a big difference.

PRICING

Deutsche bank offers products at a premium, it has positioned itself as a premium brand

offering highly sophisticated, technology driven, performance driven products. One of its

unique selling points is its Value added services. It encourages its customers to go for banks

which is highly efficient and has high level of expertise in the field rather than looking for the

strength of no of branches in the country alone.

DEUTSCHE BANKs STRATEGY AND WHERE THE OTHER BANKS ARE LAGGING BEHIND

Deutsche Banks profit at its Indian operations increased 25% to Rs. 1,033 crores in fiscal 2012-

13 led by a 78% rise in advances to Rs. 22,374 crores from Rs. 12,549 crores in 2011-12.

The bank focused on high-yielding assets and shed those offering lower yields.

Deutsche Bank also announced that its retail banking division had turned profitable seven years

after it started giving loans to individuals in India in 2005-06. The key to success has been focus

on core businesses, stress on quality and customer satisfaction while maintaining strict cost

discipline. In 2011 it sold its credit card business worth 224 crores to IndusInd Bank Ltd,

together with the platform, technology and the talent. Thereby it reduced its retailbook in India

except in areas such as Individual bank accounts, personal and Home loans, with more focus on

its core businesses.

One of the heads of the Bank said that the sale helped the German lender concentrate its retail

banking business around deposits, wealth management, and secured lending.

It was in 2008 after the financial crisis hit many of the customers of foreign banks started

defaulting on their loans or credit card payments Citibank, HSBC and Standard Chartered -

which together account for over 60 per cent of total foreign banking assets in India - suffered

significant losses in their consumer finance portfolio. This was mainly because of foreign banks

aggressive lending to the retail sector it was in this context that Deutsche bank sold its credit

card business. Foreign banks especially the big four Citi bank, HSBC, Stanchart and Deutsche.

Whereas the former three reduced their total assets, Deutsche banks Increased Its total assets

by lending to its core areas like wholesale banking and other operations, it improved its

operating profits from 1506cr to 1821cr whereas Citibank and HSBC declined with Stanchart

making a marginal improvement over its previous year . It also brought in additional

Investments to India to the tune of 455 crores in 2012.

Conclusion:

Deutsche banks CEO Ravneet Gill says that Deutsche Banks robust growth in profits in a

challenging business environment reflects its judicious allocation of resources, deep client

relationships and well diversified businesses. The success of deutsche bank is mainly due to its

focus on the core products and leveraging on its core competencies and reducing exposure to

businesses where its competency does not lie. It should continue to make profits as long as it

sticks to its current strategy.

REFERENCES:

Foreign banks in India At an inflection (Manoj K Kashyap and Shinjini Kumar ,Price Water Coopers)

Deutsche Bank India Country Fact Sheet (db.com/India)

Interview-CEO Deutsche Bank, India - Asian Wealth Management and Asian Private Banking Hubbis.

Different Branches, New Regime Livemint.com

Deutsche Bank: Winning in a changed environment: Investor day Presentation ,db.com

Foreign banks in India Into another country ,The Economist

Deutsche Bank infuses Rs 455 cr to grow Indian business , Live mint

IndusInd Bank snaps up Deutsche Bank credit card biz ,Business Line

IndusInd to buy Deutsche Bank's credit card biz , Business Standard News

Foreign banks curb retail lending, shift focus to institutional business, Business Today

India continues to offer vast opportunities to foreign banks , Business Today

Mid-sized foreign banks struggle to turn retail operations in India profitable , Business Standard News

What ails foreign banks in India, Livemint.