Interview of Ravneet Chowdhury, CEO of Bank One by Business Magazine

Interview of Ravneet Chowdhury, CEO of Bank One by Business Magazine No1294 : : "Offering Mauritius advantage to clients looking at Africa"

According to Ravneet Chowdhury, Bank One intends to capitalise further on the opportunities Africa has to offer in terms of cross-border financing and investment flows. The bank's CEO also focuses on its ongoing transformation "to meet the challenges of the future".

Business Magazine : Could you comment on the last financial results published by Bank One?

Ravneet Chowdhury : 2016 was yet another year of significant progress for Bank One, with robust growth, a refreshed brand and the unveiling of a new vision. Despite the uncertain economic environment internationally, we achieved robust growth with total profit after tax of Rs312m representing an increase of 37% as compared to 2015.

We also registered strong growth on our overall balance sheet size with total assets crossing the Rs25bn mark; that’s a 25% YOY increase! With the growth in the size of our balance sheet, we also significantly strengthened our equity base from Rs1.8bn in 2015 to Rs2.1bn by end 2016.

In this context, I am pleased to announce that Bank One has strengthened its partnership with Proparco, a subsidiary of the French Development Agency (AFD), through a new EUR 10 million subordinated loan over a 10-year period. The drawdown of the EUR 10 million as Tier II capital was completed in December 2016 and has contributed to further strengthen our capital base for future growth.

Business Magazine : How far has the economic climate worldwide impacted on the Bank?

Ravneet Chowdhury : Whilst many of the geographies we deal in continue to face multiple challenges in the prevailing global economic settings, Bank One has managed to grow faster than the industry and position itself strongly for the future to acquire additional market share.

Disruptions have been witnessed politically across the world, which creates both uncertainty and opportunity. Apart from that, the African market, being our main area of focus, is expected to stay tougher with lower growth momentum and general weak sentiment. Further, technological disruptions will continue to pose a threat to the banking industry through various Fintech companies and start-ups that are nimble and capable of swiftly leveraging on advanced technology.

Nevertheless, we see opportunities in all these developments and are gearing up for the future to make sure that we are proactively assessing and exploiting these openings.

Business Magazine : Which segment of Bank One is more profitable?

Ravneet Chowdhury : Bank One is a universal bank serving the four main segments namely corporate, international, private and retail banking. We are also recognized as a dynamic player in treasury services and have a strong e-commerce value proposition.

We concluded 2016 with a 16% increase in Operating Income to reach Rs995m. This was driven by an increase in our overall business activities which boosted both net interest income and non-interest income by 15% and 19% respectively. In addition to normal fees and commissions on banking activities, income from treasury, e-commerce and trade related activities also contributed to the improvement in non-interest income.

Business Magazine : Is Bank One presently exploring new avenues for growth?

Ravneet Chowdhury : Changing customer preferences and flexible new technologies are opening further avenues for growth. On the domestic front, we will continue to consolidate our position on the corporate and retail segments whilst developing a sharper focus with regards to the SME sector.  On the international front, we see more opportunity in growing our advances portfolio in selected markets whilst capitalizing further on the advantage of the jurisdiction as a gateway into Africa.

We are open to opportunities that come our way both in new segments and products.

Business Magazine : Earlier on, you talked about Fintech companies as a potential threat to the traditional banking industry. What about the opportunities financial technology has to offer?

Ravneet Chowdhury : Financial Technology (or Fintech for short) is certainly an area that has gained a lot of attention in recent years. Whilst there was a slowdown in fintech investment after successive years of massive growth, I believe that it will continue to play a determining role in shaping the future of the banking and financial services industry. Although 2016 showed signs of saturation in the more mature markets and slowdown in payment and lending services in particular, demand for fintech in emerging markets and enthusiasm for new burgeoning areas helped keep overall interest in fintech high.

In Africa, a silent revolution is underway across the continent’s financial services sector with fintech companies helping markets to leapfrog the legacy challenges faced in other parts of the world. As African governments and Central Banks seek to improve financial inclusion and drive in-bound investment, new and exciting opportunities are emerging for both traditional banks and fintech start-ups. Indeed, whilst 80% of African’s don’t have access to formal financial services today, it is expected that there will be 500 million smart phones in Africa by 2020! Similarly, Mobile Wallets are also gaining significant traction with 183 million people already owning a Mobile Wallet in Africa; a figure that is expanding 3 times faster than in the US!

Against this backdrop, at Bank One, we believe that banks should be at the forefront of these developments if they are to remain relevant in the marketplace. In line with our corporate values, sustained and focused innovation that benefits our customers and teams shall continue to be a key component of our strategy in the coming years.

Business Magazine : Bank One has recently unveiled its new Vision, Mission and Corporate Values. Could you give us some details?

Ravneet Chowdhury : Our new Vision, Mission and Corporate Values define the purpose and guiding principles for the Bank as it enters a new chapter in its development and sets its sights on being a leader in quality of service delivery to its clients. The launching of the new Vision, Mission and Corporate Values is yet another milestone for us and follows a very successful brand refresh and new visual identity initiated earlier in 2016.

Simultaneously, we began a journey to transform Bank One to meet the challenges of the future and a new Transformation team was recently constituted to lead efforts to review and simplify our processes and make them best-in-class. Several technological initiatives are also under way to deliver a premium digital experience for our clients. We will constantly track and measure the progress of this journey to make sure that we stay on the chosen path and attain our goals within the prescribed timelines.

Business Magazine : Why is Africa so important for the Bank?

Ravneet Chowdhury : The Mauritian domestic banking market offers limited growth prospects given its relative size and the number of operators competing for market share. Whilst we remain committed to the domestic banking market through our corporate, private and retail banking segments, the opportunities offered by the continent in terms of cross-border financing and investment flows cannot be ignored.

Through our shareholders CIEL Finance Limited and I&M Holdings Limited, we already have a tangible presence in Africa and are strategically positioned to benefit from their local market insight and the vast market potential of the continent. As you may be aware, CIEL Finance owns the second largest bank in Madagascar (BNI Madagascar) and I&M Holdings has sizeable banking operations in Kenya, Rwanda and Tanzania. Our group network presence opens up significant growth avenues for Bank One in those markets.

Business Magazine : Tell us about the Bank’s expansion strategy on the continent.

Ravneet Chowdhury : Leveraging on the presence of its shareholders CIEL Finance Limited and I&M Holdings Limited on the African continent, Bank One is positioning itself as a leading Mauritian bank with global reach, the preferred long-term partner to its clients, and an enabler for responsible and sustainable growth. Our aim is to offer the Mauritius advantage to clients looking to invest or establish a foothold in Africa and support the development agenda of the continent within a controlled and prudent structure to ensure safe and sustainable growth.

Business Magazine : The local political scene has been going through quite disturbed times for several months now. To what extent does this situation affect the financial sector?

Ravneet Chowdhury : Although the local political scene has been very active and retained public attention for a number of weeks and months, we need to keep things in perspective and our priority should be on setting our economy on a high growth trajectory for the benefit of all stakeholders. The government’s strategy to attract well-reputed liquidity providers, international broker firms, investment banks, insurance companies and fund managers will benefit the sector.

The banking and financial services sector is also faced with a number of challenges which require a national strategic approach. These include:

• the coming into effect of the amendment to the protocol on the Double Tax Avoidance Agreement (DTAA) between Mauritius and India since April 1, 2017;
• the effects of Brexit with a weakening of the pound sterling;
• the excess liquidity situation in the domestic money market;
• the Common Reporting Standard (CRS) implementation in 2017;
• and the implementation of IFRS 9 for adoption in 2018.

Business Magazine : You said that Bank One was aiming at “developing a sharper focus with regards to the SME sector”. Do you really think, then, as Government does, that SMEs can become the backbone of the economy?

Ravneet Chowdhury : Mauritius has its own specificities and a strong legacy in several sectors including agriculture, manufacturing, financial services, ICT, real estate, and hospitality which will continue to play a defining role in our economy going forward. However, with a contribution of around 40% of GDP and 54.6% of total employment, the SME sector in Mauritius is bound to become a major pillar of our economy.

For SMEs to play the expected leading role in our economic architecture, we need to review our sector strategy and devise an ecosystem that is conducive to such an outcome. SMEs, support institutions, private sector and Government must revisit the way they interact with each other and, together, invent a new business model for the Mauritian SME sector. The recently published 10-Year SME Master Plan is a step in the right direction and focuses on the need to trigger major paradigm and structural shifts towards an entrepreneurial economy. Success will depend on the commitment of all stakeholders towards the realization of our shared vision for the SME sector.

Business Magazine : Would you say that a growth rate of 4 % can be attained in the short term?

Ravneet Chowdhury : Growth of the Mauritian economy is forecasted by Statistics Mauritius at 3.8% in 2016 and 3.9% in 2017 with Tourism and Financial Services expected to be the key growth drivers. Coupled with prudently optimistic forecasts for the global economy on the assumption of a changing policy mix under the Trump administration in the United States and its global spillovers, Mauritius can very well aspire to 4% growth in the near term provided its macroeconomic and fiscal policies are geared to deliver the desired growth objective.

Whilst 4% economic growth seems within reach in the near term, the bigger challenge would be to set the economy on a higher growth trajectory in order to lower unemployment, reduce inequality and boost shared prosperity.

The MCCI's quarterly confidence index climbed by 4.9 percent to attain 97.5 points in Q4, 2016 on the back of a positive sentiment from business leaders on the evolution of the economic environment between October and December 2016; a trend that is also mirrored by the Stock Exchange of Mauritius indices in the last 3 months.

Against this backdrop of renewed optimism, the orientation of the 2017-2018 budget exercise will be closely watched by the business sector as government tackles priorities such as employment creation; poverty alleviation; boosting private investment; modernisation of infrastructure; achieving a higher level of human development and improving the quality of life for all citizens.

Higher rates of economic growth are within the realm of the possible and will largely depend on a renewal of public and private investment, driven by the intended kick-start of large-scale projects such as the Metro Express. Moreover, the opening up of life rights to foreign retirees, will likely further boost consumption expenditure, one of the most critical determinants of economic growth in the country.

On a longer-term perspective, structural labour market weaknesses are a key concern. The low employment rate, despite targeted government employment programs, reveals a disconnect between the quantity and composition of labour demand in high-growth sectors, and labour supply. Skills mismatches can be traced to education and training challenges in the context of rapid structural economic change, as net demand for labour drops in traditionally lower-skilled labour-absorbing sectors, especially sugar and textiles. Resolving the labour mismatch through education reform should be a priority for the government.

Beyond the labour market, wider economic reform effort would help drive stronger growth and alleviate fiscal constraints. Public spending efficiency could be enhanced through the targeting of social assistance programs particularly with the looming problem of an ageing population.

Finally, improvements in the quality of public services and a renewed regulatory reform effort would lower business costs and consolidate Mauritius’ reputation as a leader in this area, and support its strategy of being a regional trade and services hub.