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Financial Institution Services

Financial Institution Services. Leading the Way in India. Standard Chartered Bank May 2006. Contents. 1. India – Economic Overview. 2. India trade. 3. Financial System in India. 4. Standard Chartered India overview. Section 1. Economic Overview. Key messages.

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Financial Institution Services

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  1. Financial Institution Services Leading the Way in India Standard Chartered Bank May 2006

  2. Contents 1. India – Economic Overview 2. India trade 3. Financial System in India 4. Standard Chartered India overview

  3. Section 1 Economic Overview

  4. Key messages • India remains among the fastest growing economies in the world • With an estimated half billion strong middle class, consumer demand in India should remain buoyant • Demographics & productivity trends sets up India strongly for L/T growth • Manufacturing sector is more competitive and more outward looking • Balance of Payments situation is steady, long-term bias for the INR to appreciate • However, the economy is burdened by a substantial infrastructure constraint coupled by limited Government resources • Focussed and forward looking public policy is the key to overall economic strength

  5. There is a paradigm shift in the India growth story!

  6. India’s GDP growth has accelerated over the past couple of years, and should stay above trend in the medium term Real GDP (%y/y) Source: Central Statistical Organization (CSO), SCB Global Research

  7. Over the last decade, composition of GDP has changed towards services….but agriculture and infrastructure are high on the government agenda GDP by sector, 2004 - 05 Percent Agriculture • Growth in 04/05 suffered from sub par monsoon • Focus area for government - improved credit delivery mechanism, enhanced irrigation facilities, land reforms critical • Agro-processing industries to benefit Services • Growth driven by domestic trade, telecom, IT/ITES, financial services, hotels • IT/ITES related services currently USD 16 billion - 25% pa growth expected • Financial services growth to be led by retail lending (smaller cities), SME and fee based products Industry • Growth so far driven by exports and strong domestic consumption demand • Infrastructure a key focus area for the government - will spur revival of capital investment • Several key industries (steel, cement, etc) operating at near full capacity - private sector investment outlays to increase Source: Economic Survey of India 2004-05, Central Statistical Organisation, SCB Global Research

  8. India is emerging as a lucrative investment destination Despite its size and growing profile India is still amongst the lowest receipts of FDI inflows% of GDP Most attractive global business locations Responses of Transnational Corporations Prospects for 2005-06 (% of TNCS) Source : Fitch, SCB Global Research Most attractive prospective R&D location in the UNCTAD survey (2005-09) Percent of responses * Countries are ranked according to the number of responses that rated each as the most attractive location Source : UNCTAD, World Investment Report 2005: Transnational Corporations Source : UNCTAD, World Investment Report 2005: Transnational Corporations

  9. India has the second largest economy in Asia Pacific (ex-Japan) and is forecasted to grow at 7% pa through 2010 GDP by country, 2004 USD billion Source: SCB Global Research

  10. Industrial production has picked up which, coupled with strong portfolio investment flows, is driving equity market to new highs Manufacturing sector is driving industrial growth Percent Stock market turnover up – particularly derivatives USD billion Fiscal Year Foreign investment flows are up – particularly portfolio USD billion Calendar Year Turnover Ratio*, 2004 = 107% (12th rank) Rank Percent 1. UK 165 2. Taiwan 163 3. Turkey 141 Rank Percent 4. China 139 9. Korea 118 13. Thailand 98 Fiscal Year Source : Economic Survey of India 2004-05, RBI * turnover ratio = annual trading volume / market capitalisation

  11. Demographic trends are an Indian asset

  12. Favorable income and demographic profile coupled with low banking sector penetration present opportunities Demographic transition in India Mn of people Projected distribution of population % of population Source : Registrate General of India, Economic Survey of India 2005-06

  13. Favorable income and demographic profile coupled with low banking sector penetration present opportunities Credit to GDP ratio is amongst the lowest, significant potential for financial services Percent Source : World Bank, RBI

  14. Section 2 India Trade

  15. India’s trade snapshot • Total exports: USD 72 bn • Total imports: USD 98 bn • Top export commodities: • Gems & Jewellery 15.41% • Petroleum: Crude & Products 11.21% • RMG cotton including accessories 6.07% • Drugs, Pharmaceuticals & Fine Chemicals 4.68% • Machinery & Instruments 4.56% • Top import commodities: • Petroleum: Crude & Products 30.17% • Electronic goods 9.09% • Gold 7.69% • Pearls, Precious/Semi-precious stones 7.13% • Machinery except Electronics 6.74%

  16. Exports, Import – Top destinations • Top export destinations: • USA 17.18% • UAE 8.19% • China 6.01% • Singapore 5.71% • UK 5.18% • Top import destinations: • China 7.41% • USA 5.57% • Switzerland 4.76% • Germany 4.11% • Belgium 3.60%

  17. Government has ambitious plans on trade … target to double share of global trade by 2009 Trade flows have been growing @ >20% in past few years … USD billion • India’s largest exports comprise chemicals, ores and minerals, textiles, engineering goods • Over the last 2-3 years, export basket has changed to include petroleum products and automobiles • India’s largest imports comprise oil, gems & jewellery (for re-export) and telecom & power equipment … resulting in increased share of the global market Percent Fiscal Year Source : Economic Survey of India 2004-05, Department of Commerce

  18. Feeding India’s appetite Chile’s export growth to India key driver to bilateral trade …. USD million • Chile’s largest exports comprise copper ore and concentrates, other metal ores and minerals. Minor categories include paper products, fish & fruit. • Exports to India doubled in 2003-04, now moderating towards 10-15% y/y. Chilean imports from India maintain a more sluggish rate of growth, 0-5% y/y. • CAGR projections suggest export growth of 7-10% remains consistent with broader India growth of 7-8% over 2006-10. • The prospect of reduced trade tariffs in 2006 onwards suggest export growth risks lie to upside. This will continue to be driven by India’s growing demand for industrial materials for capacity and infrastructure expansion. Fiscal Year … underpinned predominantly by copper USD million Source : Economic Survey of India 2004-05, Department of Commerce

  19. Section 3 Financial System in India

  20. In a nutshell • Securities market is doing well • Insurance market opened up partially 5 years ago • Banking sector - much progress • Opening up the pensions market under way • Global banks & institutions: some in, some watching

  21. Banking Structure in India Figures in brackets indicate number of banks in each group Source : RBI Report on Trend and Progress of banking in India 2003-04

  22. Indian Banking Sector - Much progress • Towards international norms in accounting & disclosure • Investments in technology & Centralization of back offices • NPL problem - looks manageable • Partial privatisation - most banks listed • Balance sheets cleaned up, some banks have adopted US GAAP standards • Capital Infusion by Government to strengthen weak banks

  23. Banking Regulation – A snapshot • Regulated by Reserve Bank of India - Apex regulatory institution • Can be classified into the following : • Public Sector ( State Owned) banks : 28 in No • Private sector banks • Foreign Banks • Cooperative / Rural Development Banks • Foreign banks allowed to offer full product suite including INR clearing, consumer and corporate banking products • A sample of some regulatory prescribed minimum ratios : • Capital Adequacy ratio : 9% • Cash Reserve Ratio : 3.5%, Statutory liquidity : 25% • Directed lending ( priority sector ): • 32% for foreign banks • 40% for other banks

  24. Indian Banking Sector - Highlights • Government banks have 75% of the business. State Bank of India Group alone has 25%. • Five global banks & 2 private banks lead the way in customer service, technology, product innovation. • Foreign banks dominate the upper end of the retail & corporate market • Consolidation is under way

  25. Section 4 Standard Chartered India overview

  26. Review of the Year 2003 Runner-up Best Overall Arranger of Domestic Currency Asian Bond Leadership Across Products #1 Foreign bank Independent Recognition Balance Sheet Size (US$ bn) Wholesale Banking • Trade 1st • Cash 3rd • Foreign Exchange 1st • Interest Rate Derivatives 1st • Fixed Income/ Syndications 1st • Custody 1st India’s Leading Foreign Bank 9.00 7.62 2006 Best Cash Management South Asia 2004 Best Bond House India 8.00 6.58 7.00 5.64 6.00 5.00 4.00 2.36 3.00 Best Cash Management Bank, MESA 2.00 Among private and foreign banks Best Debt House India 1.00 - ABN HSBC CITI SCB Consumer Banking Net Profit (US$ mn) • Cards receivables 1st • Personal loans1 3rd • Auto loans1 2nd2 • Deposits 1st3 • Investment Services 1st2 133 127 140 Best Bank in Emerging Currencies 120 100 80 44 44 60 40 20 Enterprise Wide Transformation (B2BeX) Asia-Pacific 0 1 Share of new flows 2 Among bank distributors 3 Among foreign banks ABN HSBC CITI SCB SCB has clearly demonstrated its commitment to India

  27. Leading the way in Asia, Africa and the Middle East Largest international bank in India Strong focus on India Top 3 foreign bank in each major market Product delivery Strong on-shore presence and in-depth local knowledge Relationship and leverage with key corporates and institutions Stature and rapport with regulators Our Value Proposition Coupled with our deep understanding of the local markets, our product capabilities are tailored to suit our client’s needs, whether they be a local corporate or multinational Corporate Banking Cash management Bilateral Credit Trade Finance Raising Capital and Risk Management Strategy and Equity M & A Forfaiting LBO/MBO FX, Derivatives Equity Private Placement Structured Trade Finance Securitisation Private Equity Investing Fixed Income Loan syndication Project & Export FinanceArranging & Advisory Global Markets SCB – a comprehensive banking solution

  28. Sample Financial Institution Client Base in India

  29. Working Together – How SCB India can help • SCB Can assist with credit reports • On Indian Banks • Indian Corporates • Issue Guarantees in India • Turnaround is fast • Our guarantees are acceptable( even by government units ) • Advise/ Confirm / Negotiate L.c.'s forIndian beneficiaries • Remit funds in INR • Corporate referrals • Open accounts for your customers • Full banking service providers • Employee account solutions

  30. Contact information Financial Institutions, India Pradeep Sarin Telephone +91 22 5631 4111 Facsimile +91 22 5631 4166 Email: Pradeep.Sarin@in.standardchartered.com Tejinder Singh Telephone +91 22 5637 2363 Facsimile +91 22 5631 4166 Email: Tejinder.singh@in.standardchartered.com

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