In India, JP Morgan has managed to stay a step ahead of its global competitors. It was the lead financial adviser to Walmart for its Flipkart buy, the biggest deal in Indian retail so far, even as profits from its India business grew 10 per cent in FY18. It advised on M&A transactions worth over $40 billion, finishing 2018 at the No.1 spot on the Bloomberg India M&A league table.
The banking system in India is going through many technological changes, and for JP Morgan, technology has been a great ally. The bank currently has more than 1,000 clients in India - a mix of multinationals coming into India, big domestic companies, global as well as domestic investors and financial institutions. Apart from branches in Mumbai, New Delhi, Bengaluru and Chennai, it also has virtual branches. "We understood that we need one comprehensive team within the organisation where the front office bankers, the transaction banking salespeople, the trade sales teams, the product team, operations and technologists come together to weave a seamless experience for our clients while simultaneously working with the regulators to ensure that we eventually move to a paperless system," says Kalpana Morparia, CEO, South and South East Asia, JP Morgan.
A Bigger Pie
The next phase of digital transformation will involve heavy use of predictive analysis as seamless movement of money, more efficient working capital cycles and risk management solutions to hedge currency and commodity related risks become hygiene factors. "Machine learning, artificial intelligence and Big Data are enabling us to do new things. We have all the data, and data analytics will enable us to put it in shape and create solutions for our clients. We are not merely the banker that is going to provide pipes; we are also partnering with clients to help manage currency and (provide) a risk management system that is integral to any corporate treasury," says Morparia. A global presence and analytics muscle means JP Morgan can capitalise upon the emerging opportunities offered by new technologies.
For JP Morgan, 2018 has been a record year in India for M&As. In 2017, the stellar performance had come from debt capital markets. "In 2017, the USD bond markets saw significant issuances from emerging markets. In India, we had the largest market share in the DCM (debt capital market) fees pool. This year, we expect some volatility given the election calendar. However, I would still say that M&A would probably be the single highest revenue generator within the banking fees pool," adds Morparia.
India presents a big opportunity for integrated corporate and investment banks as regulatory thrust is towards greater access to debt capital markets. Additionally, India continues to attract capital and create opportunities for both 'inbound' and 'outbound' deals. Many companies are reinventing themselves and finding gaps in products, geography and services. "The domestic activity is purely a consolidation play. We have seen consolidation across steel and power, which should continue this year as well. The auto components business will be driven by a similar thought process. They have some core strengths and therefore there are some acquisitions that can fill their portfolio. The same will be true of the tech industry," shares Morparia. Thanks to its global presence and corporate relationships, JP Morgan is in a position to offer end-to-end solutions.
As part of its digital transformation roadmap, JP Morgan has explored and implemented new technologies such as blockchain, Big Data, artificial intelligence and robotics. "We believe a lot in what we call 'Insourcing of the Fintechs'; we will, in select cases, also outsource," says Morparia. To retain its edge, the bank has set up accelerators and incubators, invested in and acquired fintech start-ups, and formed strategic partnerships.
In India, JP Morgan's focus is largely on companies with international trade links and large firms, to whom it provides commercial banking services, including cash management, trade finance and foreign currency payments, and lending services. "Our client segment includes large MNCs operating in India, large Indian corporates with their increasing trade and investment linkages with the global economy, and financial institutions. We also have a very large base of MNC clients who are not the top Fortune 500 companies but mid-sized US companies that bank with us," says Morparia. Increased digitisation makes it easier for the bank to fashion credit structures even for small and medium MNCs - a segment that is likely to increasingly rely on banks for credit underwriting. The bank sees significant opportunities in high-growth sectors such as e-commerce, healthcare, financial services, urban consumption-related activities and private equity.
JP Morgan is about three years short of completing a century in India. Not many can claim to have stayed relevant in a rapidly changing environment for nearly a century.
The author is a Mumbai-based freelance writer.