Best Foreign Bank: The Global Edge

Bank of America Merrill Lynch (BofAML) is no ordinary foreign bank. It’s Global Transaction Services business handles one-third of its Asia Pacific foreign exchange and payments transaction volumes and has been clocking remarkable growth in commercial banking with advances zooming 33 per cent to Rs 12,346 crore in fiscal 2016. This is faster than the average growth rate of 18 per cent in advances the bank clocked the last four years.

Little surprise, BofAML bags the top honours in the ‘Best Foreign Bank’ in BW Businessworld’s Best Banks’ Survey 2016.

Post the Lehman crisis, BofAML installed a new credit system that relies on evaluating cash flows of companies before making credit lines available and the move has helped BofAML to keep defaults low. The bank followed that strategy with 100 per cent provisioning. The result? The bank has had zero NPAs in three of the last four years.

With just four branches in India, which operate as outposts of its US operations, its balance sheet expanded 21.6 per cent in the last four years indicating how far it has moved on the re-growth path. Last year, the balance sheet expanded at a faster clip of 26 per cent to Rs 35,354 crore reflecting the increased business opportunity in India.

In fiscal 2016, its net interest income grew by 26.5 per cent to Rs 1,225 crore bolstered by high-yielding advances; net profit grew 19 per cent to Rs 709.87 crore.

In line with its global best practices, BofAML has set up a system of grades for corporates availing credit lines. For instance, last year, when a big firm depicted signs of inconsistency in payments, BofAML downgraded the company and pulled out its credit lines, and recovered its loans long before the company hit the rough road.

Says Kaku Nakhate, President and India Country Head, Bank of America: “As a firm, we take a holistic view to managing risk across our global platform. This framework is the backbone of our governance structure and underpins our ability to serve our clients and grow responsibly. India has been one of our priority markets and we take pride in the growth we have achieved across all our businesses through our customer-focused strategy, without compromising on risk and governance.”

It is also for this reason the bank 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 the bank. The bank’s biggest offering for global clients is its global transaction services, through which millions of transactions in and out of India are handled. The bank has also rolled out an online global platform called CashPro, a cash-management platform in India that executes transactions across the globe. It enables corporates to access all global treasury, liquidity, trade and foreign exchange, manage cash, and payments and receipts globally.

BofAML’s investment banking has helped raised large sums of money through “green” bonds for India. This arm is also the largest broker to foreign portfolio investors, instrumental in directing large sums of money to the Indian sub-continent. Also, if Indian companies want to raise money overseas, through QIPs or other instruments, the bank’s i-banking arm is their natural choice.

The bank foreign exchange business is another rapidly growing arm as Indian companies expand their tentacles overseas. Little surprise then Nakhate is gung-ho. “We got very good ratings as a foreign bank, thanks to our global processes that we have implemented locally.”

It is a bank with a vision to be local, but think global.