The Global Advantage

Bank of America Merill Lynch is a unique focused foreign bank that serves only a marquee set of clients. Unlike other foreign banks with a finger in different pies, the bank focuses instead on offering cash management, loans and advisory to a select set of clients.

The bank handles more than a third of Asia Pacific’s foreign exchange transactions. It is not priming its loan book for the sake of building an asset base. In fiscal 2017, its advances rose 0.5 per cent to Rs 13,651 crore. Its largely focused lending has meant that it has almost no non-performing assets (NPAs) but for one loan account of Rs 110 crore that turned bad last year.

Little surprise then that the bank has once again bagged the top honours as the ‘Best Foreign Bank’ in the 10th BW Businessworld’s Best Banks Survey 2017, in association with PwC.

Bank of America Merrill Lynch or BofAML has developed this conservative streak after the Lehman crisis, when it decided to focus only on clients that require global banking. After the financial crisis, it streamlined its risk structure, and for this reason it works with a select roster of Indian and foreign companies, most of whom need global banking services. Indian companies that have global operations or global companies that have large franchises in India naturally then seek out this bank.

The bank seeks clients with running cash-flows before making credit lines available. It is also a move that has helped it keep defaults negligible. Last year, one of its loans amounting to Rs 110 crore turned sour. But, on the whole, BofAML has fully provided for dud loans. As a result, it has had zero NPAs on its books for the last three years.

Says Kaku Nakhate, President and India Country Head, Bank of America: “India continues to be one of our priority markets and we have a deep and strong commitment to increasing our presence in the country. Client focus is an important pillar of our responsible growth strategy and we will continue to provide clients with the best-in-class products and services to help them build and expand their business. While our corporate and investment banking verticals produced stellar results as usual, our global transaction services business this year outperformed the market.”

With just four branches in India, BofAML has still done respectable business. In the last five years, it assets expanded 11.59 percent to Rs 34,845 crore. However, the bank pulled back on the growth front in India as it kept lending to a minimum, largely financing working capital. Its capital markets division did quite well. As a result, the bank’s income rose 7 per cent to Rs 2,781 crore.

The fiscal gone by was one when the fixed income market did not do quite as well as expected, impacting the bank’s profit growth. Its net profit increased just 0.9 percent to Rs 715.8 crore.

BofAML offers advisory on acquisitions to its global clients. In 2017, a slew of regulatory changes has meant that the bank has been on its toes, educating customers on regulatory procedures.

“We continue to partner with multinationals seeking to enter India and advise them strategically around regulations and market scenarios,” says Nakhate.

Its biggest offering for global clients is its global transaction services (GTS), through which millions of transactions in and out of India are handled. It handles one-third of the Asia Pacific inflow-outflow foreign-exchange volumes.

It has a platform called CashPro, a cash-management platform that executes transactions (both high value and volume) across the globe. This enables corporates to access all global treasury, liquidity, trade and foreign exchange, manage cash, and payments and receipts globally.

“In 2017, our investment banking business performed spectacularly as corporate started exploring new opportunities in a falling interest rate scenario. We successfully helped clients raise capital, both equity and debt, advised companies consolidate through mergers and acquisitions and won market share through our fixed income franchise,” says Nakhate.

An international connect, indeed.