An Engineer Turns Banker

Tracing a path from India to Indonesia, Mr. Prakash Subramaniam shares his experiences on how he ended up branching out of engineering into banking.  Given the turbulence in the global markets today he provides valuable insights into what is happening in this all important sector and what we can expect in the future.

Mr. Prakash Subramaniam (1986, Mechanical)

Introduction

There is a common saying that goes, “it runs in the family.”  A doctor wants his child to be doctor, an army man wants his son to join the armed forces, and an actor wants his child to be an actor.  And here I was, born to a Banker and was destined to be a Banker.  The difference was that my dad never wanted me to be a Banker and used to remind me that if I ever join banking I would be wasting my career after having earned a degree in Engineering. Today he is proud of what I am.

Philip Kotler, the Marketing Guru, wrote the marketing bible in which he introduced the 4Ps - Product, Price, Place, and Promotion. These 4Ps are on the fingertips of every individual who wants to make a career in Marketing. I feel this is applicable not only to marketing, but to each one of us who are a Product or Commodity:  the Packaging or Promotion is the Education we obtain which slots us in the Right Place (Job) and the Price we get paid for it. Your educational qualification is only a VISA into your industry of choice. Every calculated step that you take will determine your future. Your future is in your hands and its only you that can shape your destiny.

Beginning of the journey into Banking

Let me start with a quick personal story, before I give you a sense of the financial services sector.

My father worked for a Colonial British Bank, Grindlays Bank. The logo of the bank was an elephant standing on its two feet symbolizing  “Royalty, Strength and Power”. I saw him grow in the bank over his 30 years of service in a culture, which had elegance and class and thus started my dream to be a banker...

Life always presents you with choices and you need to decide what is good for you. All through my life, I have been presented with 2 choices - Post 10^th standard to join the science or commerce stream, Post 12^th to do Engineering or CA. I chose the former.

Post Graduation, I joined Tata Power, just to ensure that I lived up to my father’s expectation of working as an engineer. After having worked for a year, had the choice to either pursue my MBA in India or do a Masters in Engineering in the US. I chose doing an MBA in India.

Post MBA, my father was keen that I join a leading engineering firm and productively use both my engineering and marketing degree. The dilemma continued... there were no banks coming to the campus for recruitment. I was offered a job at Godrej in their Refrigeration Marketing division, which was my second specialization in Engineering.  I took up the job and joined Godrej and worked with them for three months.

Anyone in my place would have chosen a Commerce and a Chartered Accountancy to get into banking, but you can see that my dream of becoming a banker did not fade, even though I took a different educational route.

As destiny would have it, got a call from ANZ Grindlays Bank in late1989 asking me to join them, thanks to the summer internship I had done in their investment banking division during my MBA. I received a call from the General Manager of the Information Technology unit who wanted me to join this group. I readily accepted despite a bit of opposition from my dad who even refused to put in a word given his strong principles. But as destiny would have it even before I accepted the offer, there was an opening in the investment banking team and the General Manager under whom I worked for the project offered me a role in the investment banking team and thus began the banking journey in 1989.

As a management trainee, I had to go through a 3-month internship program with a group of 30 other people who were from IIM. We went through an intense training program, which were a mix of hard work and some fun. I still remember the Foreign Exchange training where we were woken up at 3 am in the morning with flash news to be used for taking / squaring our Foreign Exchange positions across our team mates. Our 3-month training was spread across Mumbai, Delhi and Chennai and staying at the Oberoi in each of these locations, which was a big luxury those days.

And then came the day when I was assigned to my unit – Capital Markets. I was thrown into the sea and had to start swimming from day 1 in the midst of the equity capital market sharks. Each day taught you something new and what helped me the most was quite a few of the staff had worked for my dad and had great respect for him. The lesson I learnt at that time was it pays to be good to people as you move up the corporate ladder.

Shocks to the system

I have seen the High and Low of the banking industry in the last 25 years. As they say there is a 4-5 year cycle for every product and the banking sector too has witnessed these cycles with many events that have affected it over the last 25 years: The Gulf War 1990-91, The Asian Financial Crisis in 1997, The Dot Com and Tech Bubble burst in 2000, 9/11 attack in 2001. The SARS outbreak in 2002, Global Financial Crisis in 2008 and now the ongoing European Debt Crisis with a potential Greek default.

Prior to every event the market was on a high and with each event we saw both the equity and debt markets going into a tailspin. The crash was so rapid that traders were like headless chickens reeling under heavy losses. Banks were forced to take prudent measures to cut loss positions. The fact that we went through so many low cycles made us more resilient to the shocks and with every event we would grow much stronger with an ability to face the worst.  We would remain liquid and well capitalized to take advantage of the shocks.

The key was we used to treat each shock as an opportunity and post the 2008 global financial crisis we decided to enter aggressively and captured market share from our competitors. For a decade from 2003 – 2013 we grew at high double digits even during the global financial crisis.

Your personal and professional life is not always a bed of roses. You will face thorns or obstacles in each stage of your life and every obstacle you overcome teaches you a new skill, which makes you a stronger person who is willing to accept challenges. The same applies when you rise the corporate ladder, with every move up the ladder you will be faced with new challenges both on personal (interpersonal rivalry, jealousy, etc.) and professional (competition, strategy) and you need to overcome each of these and rise up to become successful.

Banking and Financial Markets

Over the last decade the banking and financial sector has seen unprecedented change that the industry is anything but the same. Banks have been trying to restructure themselves in the face of significant headwinds. The regulatory rulebook is being rewritten, the industry has suffered major reputational damage and major economies have struggled to emerge from recession. Further, the rising cost of doing business, regulatory requirements for maintaining additional capital and liquidity, changing consumer behavior (move to mobile and online channels) has resulted in banks taking a beating on ROE (return on equity). The banking industry is facing intense competition and is in a phase of consolidation and systemic stability.  The key focus is on technological innovation, disintermediation, cost efficiencies and shareholder value.

Equity markets have hit record highs but on the other hand economic outlook is still not positive and questions are still being asked: Is Europe coming out of recession, impact of the US debt ceiling, will “Abenomics” kick start the Japanese economy, will China’s bubble make it go the way of Japan?

Banks globally will need to incorporate enough flexibility in their models to respond to the new rules keeping in mind the future uncertainties.

The five forces, which will drive banks to change over the next few years, are:

Regulations: New global regulations will challenge the profitability of the banks.

Customer: Greater transparency, personalized products and seamless transition between channels to ensure solutions and a good product service mix.

Technology: Exponential growth of data collection, storage and analysis, data privacy and cyber security.

Competition: Battle for scale and market leadership, payments and lending solutions.

Society: Regulatory and Compliance culture will need a behavioral change, shareholder pressure to deliver sustainable returns and reward investors.

The global and local regulatory environment will necessitate banks to comply with requirements for capital, liquidity, leverage, recover and resolution planning. Banks will need to do a strategic assessment of their Business Model, Customer Relationships, Organization Structure and Infrastructure and effect a transformational change under the regulatory constraints:

With regular shocks hitting the market over the years, Regulators are ensuring that Banks become more resilient.  As reforms kick in, banks have started to focus on their core functions and aspects of their value chain that have a competitive advantage thus restoring reputation and profitability and support economic growth. Banks also need to collaborate with third parties to deliver their new business models more effectively.

Are Banks needed?

In spite of the bad name big banks have been assigned due to the great crash of 2008, in my view, banking is still a necessity and with technological advances the demand for quality professionals continues to grow. While the heyday of banking perks (stock options, performance bonus) are history and remuneration is being capped by regulators, it still ranks among high on the pay scales across sectors.

Banking is also opening its doors to highly skilled and qualified professionals from other sectors such as technology, consulting and services. The days of the highflying investment bankers are slowly coming to an end and we are moving back to the traditional and prudent ways of commercial banking. As they say “old wine in a new bottle” still tastes good.

Summary

I have given here, an account of my personal journey in banking, even though I did not get the traditional education for a banker.  I have also shared how my career progressed.  Finally, I have also given you a sense for where banking is headed.

My mantra for success that I would like to share with you can be summarized as the 3Ds: Destiny, Dream, and Deliver.

Think of a Destiny - i.e. the goal or Aim in your life. Dream your destiny every day and ensure you Deliver to achieve your Dream and Destiny.

As our departed and legendary President Abdul Kalam said “Dream is not that which you see while sleeping, it is something that does not let you sleep.”

   

 About the author:

Prakash Subramaniam lives with his family in Jakarta, Indonesia. He works as a managing director at a global bank. He graduated with a degree in mechanical engineering.