“Any business depends on people who create it and then develop”
VTB Bank, Russia’s second largest bank, last year decided to make transaction business a separate business line, Global Transaction Banking, and invited Gurinder Nihal, a former Royal Bank of Scotland and Citibank top manager, to develop it. Gurinder Nihal, VTB Senior Vice President, told RBC Daily about VTB’s achievements in the transaction business and its further development.
– Nihal, is it difficult to sell transaction products?
– When you try to earn money everything is difficult enough. That said, Transaction banking should be the lifeline of all banking. Irrespective of what kind of financial transaction takes place between our clients with our clients and the bank, there is a need to move money, to manage liquidity and working capital. That is where VTB is positioning itself very successfully.
– What is included in the product line of VTB’s Global Transaction Banking?
– The product line includes such products as our customers’ cash management (tailored solutions for corporate client treasuries including pooling and budgeting), current accounts, deposits and payments management, collection services, as well as cash and settlement services, and custody business. For companies with wide branch network in different parts of Russia we offer various solutions pooling their available resources. This is all delivered through highly sophisticated yet client friendly electronic banking platform options which I believe are market leading. If our customers conduct their business abroad, our products include international payments settlement and foreign currency control (central bank controls around transfers between residents and non residents, and foreign currency transfers).
Additionally we can also offer our services in this area in most of our 19 international subsidiaries also. We also offer custody services to our customers. In 2011 GTB received mandates from 28 Large Russian corporates for cash management of over 650 legal entities. Additionally we provide all documentary business operations for different kind of guarantees and letters of credits
– In your opinion, what market share does VTB’s transaction business occupy in terms of the Russian market?
– In general it is difficult to assess as market data at times includes corporate and retail segments today for some institutions. It depends on product. From our estimates and based on market data that we have, in 2011 we were ranked first in terms of trade finance transactions (VTB Group’s market share is about 22%).
We are 2nd placed in the market in Current accounts (with 11% of market share and growing) and number 1 in deposits with about 20% of the market. VTB Factoring is now officially the Number 1 in the Russian market in terms of market share (22% of the market). Over the next 3 years, we expect to double the share of transaction banking wallet in the middle size companies and increase 50% in large companies (wallet is not to be mixed with market share).
– What is the volume of VTB’s investments in the transaction business development?
– The investments are significant enough, but I am sorry I cannot disclose this information. I may only say that, for instance, we plan to spend dozens of millions rubles for electronic banking platform creation.
– Do you develop this business independently or have some ideas of creating an alliance with a transaction company, or, may be, to buy a relevant such a company?
– We considered the issue on setting up various alliances. However, in the areas where we want to be market leaders, as for instance in areas of Domestic Cash Management and liquidity solutions or development of Trade finance, we want to develop independently and make all necessary investments.
– What is the volume of bank guarantees VTB issued in 2011? What are the plans for 2012?
– By the 2011 year results VTB’s portfolio of guarantees was RUB 240 billion, excluding TransCrditBank, only VTB. This year we expect 20% market growth, and our portfolio may grow by 30%.
– What types of guarantees are the most popular?
– These are, first of all, performance guarantees that relate to various infrastructure building and large projects implementation, and then on customs guarantees we are one of the biggest providers in the Russian market. They represent a significant part of our portfolio. I mentioned only those guarantees that are a substantial part of all our bank guarantees.
– What can you say about the security of these products? They say, very often they are vulnerable to fraud.
We recommend that all our customers should to go directly to banks if they need a bank guarantee, and avoid any agencies or third parties allegedly acting on behalf of banks. As for VTB, we, like other Russian large banks, do not work through intermediaries. We issue bank guarantees directly to our customers. We also cooperate with state regulators on a continuous basis to ensure 100% transparency in relations with our customers and secure their interests. Additionally we request that whenever any beneficiary is suspicious or in doubt about any guarantee that they receive, they should check it with the issuing bank.
– What are the plans for transaction banking development for the coming years?
– VTB’s Global Transaction Banking (GTB) has approved its 3-year strategy for 2012-2014. Under the strategy we expect to double GTB’s operating income. Now it is RUB billion (First 9months IFRS 2011). We are building a business that is scalable, sustainable and will contribute significantly to the bottom line of VTB. We will deliver the growth based on having and continuing to build a team of top professionals who are client centric, being innovative and launching solution sets and products that will add value to our clients, and aligning all interactions and process with the client in mind (from a proposal, sale all the way to daily execution in our operations centers).
– What new products are you going to launch in 2012?
– The new key products we are going to launch are those products that are aimed at ensuring proper management of our client and product supply chain model, and continued enhancements to our electronic banking system (including issuance of letters of credits, Swift format statements innovation etc). This summer we plan to develop and launch applications for electronic banking platform support for Iphones and Ipads. I believe we will be the first bank on the Russian market that would do that. Russian financial specialists travel around the world more often, therefore, this function will be extremely useful for them. Both treasures and accountants should have a possibility to approve necessary payments even if they are far from their office. The number of products per client should rise from the current 3 to 4 products per client over the next 3 years.