How has life changed in the last one year since President Trump took office for the second time for Wall Street as well as for corporate America?
The Trump administration… came in with the same sort of policy initiatives that they had on the table in the first term. Tariffs and trade, taxation, immigration, deregulation-they just went about them in a different order. Both tariffs and trade, they’re trying to think about America as a big end market. It has value, but American companies’ ability to do business due to non-tariff barriers has been a problem. And then, the other piece is national security. What do you need to make sure you have the means of production and the capability of producing, either on your property or elsewhere with very, very close allies. I think we have learnt a lot from Covid on how global supply chains really work. People were not paying attention to this and suddenly we realised we were dependent on product lines. All this is linked to creating US jobs in the Midwest to manufacture stuff. Immigration is equally important to control our borders. Deregulation is fourth in line only because it takes the longest to achieve.The phrase de-globalisation is in vogue but the truth is, at the end of the day, commerce flows. There’s still record volumes coming into the US and other places. It’s just being thought through on those dimensions of national security. What do we make here? Did we have jobs that moved? Washington is clear on its motives. I think if people on the other side of the dialogue understand this motive, I think it is easier to navigate even if you disagree with the strategy or the economic principles. People are fast realising the priorities of the US. It’s important for companies to have access to the US markets. It’s important for governments in the US and outside to have good relations with each other and we have been trying to reset that from our end and the Trump administration has been taking it into account and accordingly prioritising.
Does that mean it’s been business as usual for Wall Street and corporate America, taking into account that, as you say, is a continuation of a progr-amme that started some time back?
The market tries to ascertain the end point of all this much faster than it can ever take place with much more precision than one can estimate it. But every day, it gives a judgement about whether this is going the way we like or going the other way. End of the day, if you see our investment banking fees worldwide-first half versus second half-in the second half, fees were up 25-30%. It bodes well for us and that’s reflecting client activity around the world. If you think about the consumer, the US economy, our research analysts forecast full year 2026 US GDP growth from 2.5% in 2024 down to 1.5% in 2025, then back up to 2.8% now in 2026.This is primarily because of the clarity that is coming through. What was unclear last April or May became clear by the end of the year and people adapted to it, they understood it and are now ready to go. The beneficiaries of the tax bill and the beneficiaries of deregulation are still coming into the process.So, Wall Street, the market, companies are pretty excited, and we then can supply our services. The stock markets will give day-to-day judgements, but I would say to people to be careful about over assuming that one day’s move is any major move.
Do you get the sense that diplomatic relationships are increasingly casting a shadow on the corporate environment? Especially when it comes to corporate America’s dealings with emerging markets on issues like trade, commerce, financial flows?
If you’re trying to do a 10-year investment and assume that no rules will change or that they will remain only as good rules, then it’s not going to happen in the real world. I think the pace of it is different but the principles are not different. Look at India. All the things that Prime Minister Modi is trying to do with Make in India and other policies, he’s consistent and been successful in putting it in place. One could have different viewpoints at different times but he has been consistent with his vision. So it’s a set of rules that you have to understand and adapt to. In any dialogue, if you say we are changing, it causes people to pause and think. People always love consistency.I think diplomatic and political relationships will always affect business because they affect society. But on the other hand, the capitalist system really kind of powers through and adapts to rules. And we just love rules that are more certain. The tone may be different but on issues like national security our position has been the same since our country started.
We’ve seen record exits by foreign portfolio investors from the Indian equity markets.
Capital flows to where people see opportunity. India is predicted to grow around 6.8% for the full year 2026. It’s moved to be among the top five economies in the world. It is a great place. Those flows may come and go at the margin but at the end of the day, every businessperson I talk to thinks of India as a land of opportunity. What our administration is trying to do is to make sure it’s a level playing field, and they won’t be doing that unless they’re being told by US companies that they want to go to India for business.India has great competency, capability and is also a huge market. It’s growing faster than anybody else’s market. It has lots of opportunity to grow and needs lots of capital to make it happen. So we shouldn’t read too much into it?
Whatever the flows are, the stock that’s still sitting there is huge. As I said, people wouldn’t be nudging the administration for a trade deal if they weren’t interested in investing in India. And this is true even for non-US companies.
How are banks looking at this tussle between the Federal Reserve and the US government and the recent developments over the Fed chair? Do you think the future course of monetary policy can get affected or altered by this?
The President has the right to choose the members of the Federal Reserve Board and he’s making a choice for the chair. It’s his job to choose a good chair. All the candidates will be fine, and the policy will reflect their view of the data.The independence of that decision making is one of the strengths of America historically, and the ability to have markets that people can depend on allows us to have the debt footprint that we have. People know that we not only have the power to pay the debt, but also, it’s backed by sound monetary policy. But we’re dealing with massive change in data and information. Everything around the pandemic is still working through the system and so, I think people have to be careful about assuming what’s happened in the last 48 months is really reflecting the massive impact of the pandemic or the massive feeding of money into the system to offset the economic cost of the pandemic worldwide or the debts that came out of that.
So you don’t believe that the independence of the Fed is getting subverted, which in turn will impact the future course of monetary policy?
I think if the market perceived that was a risk, you’d have a very different market reaction than what you have currently.
Indian regulators have always expressed strong reservations about cryptocurrency. How are global banks like yours handling the crypto challenge, both as an asset class as well as a payment mechanism?
As an asset class we advise our private clients and allow them to buy it through us in ETF (exchange traded fund) form through our private bank and institutional business. We also do derivative trading in it.As a payment vehicle, as you know, there’s the stable coin legislation. The debate now is what’s the way to regulate it so that citizens can put some money in stable coins and be assured of its safety and that it won’t get commingled with other asset classes. So the debate now is primarily around the possibility of deposit flight from broad-based banks. The US Treasury has come out with a report saying they see $6 trillion likely going out of the banking deposit system. That will constrain lending capacity for small and midsized businesses or consumers. That’s something that we haven’t got a great solution for right now. Lending capacity of banks is critical for the US economy. The alternatives to banks are either not deep or they come at a much higher cost. And even if that happened, in theory we could pay interest and bring the deposits back in. But the borrowing cost then has to go up over those deposits.
So do you concur with that view that stablecoins will leave banks with a less liquid balance sheet and the Clarity Act will facilitate that?
I think if that money can only be used to buy treasuries and put in deposits of banks to help the economy grow-we have to figure out whether that’s what people actually want. Banks like us move trillions of dollars in a day. It moves real fast, in real time. Consumers don’t know what happens behind the scenes in the settlement process when they hand over their credit card to make a transaction. There are costs involved in these cross-border or information-laden trades and the current debate that you are seeing centres around that. Cheaper and faster payments is something we’ve been driving through the system for years. It started with the Bank of America card, which became the Visa Card, which we gave the industry 10 years ago, so it could become a net-work. Today the banks or the merchants stand up to their obligations and it’s a powerful system. Any potential replacement needs to be equally powerful.
There’s a growing perception that the dollar will remain the most powerful and the reserve currency, but a question mark over its unquestioned supremacy, particularly because so many central banks are bringing down their US Treasury holdings. What’s your view?
That’s a lot more complex. Are they bringing down on a relative basis or in absolute terms? That’s an important factor. Also are the central banks getting other dollar-denominated assets? If you bought gold as a central bank, it’s a dollar-denominated asset. If you bought oil as a country and stored it, it’s a dollar-denominated asset. If you have investments in foreign companies, you have a dollar-denominated asset risk. And so I think if we have a strong country, the dollar will be a primary means of commerce. It’s not because it’s dependable. There’s an independent Fed, there’s a rule of law and the economy is so sizeable that when you think about the economy of California, it is as big as most of the countries in the world. If you’re going to access these big economies, our citizens are going to transact in dollars and so you’re going to get paid in dollars.
You said a lot of American companies that you talk to are excited about India. How do you look at the market opportunity?
We’ve been in India for 60 years. In India, we have capital markets, investment banking, corporate banking, treasury services-it’s an institutional business. We also have our global business services because of the quality of talent. So that’s a lot of technology and processes. That alone is 20,000 plus and we continue to invest. India is a good place to do business. The policies that Prime Minister Modi has implemented over the last decade have a continuity to them. But I keep urging the regulators and the bureaucrats to make it easier to do business. It’s not just the trade or tariff barriers, but it’s also just hard to get things going.
Can you elaborate?
I get that countries want to protect their citizens, but data localisation rules should be considered in the grand scheme of things. If you’re going to have multinationals moving around, you need to understand why they did it. It would have cost implications not just for the companies but also for our economy. India has done fabulous things on the real-time payments and accounts for everybody, cash transfers and you will be growing at a healthy clip next year so that’s a pretty good place to be investing.
Many would argue-compared to some of your Wall Street peers or even an HSBC-Bank of America has given away its early mover advantage in India and is left with a smaller presence. Is there a plan to reboot your India plans under new leadership?
We serve outside of America multinational institutions, large indigenous companies, capital markets and then treasury services. So that ebbs and flows by clients and client selection and capabilities. We have not been a retail bank or a wealth management firm outside of the US. How we plan to grow in India is by deepening corporate coverage to expand our horizon. We’ve been growing in India and we shall continue to grow in India. Our clients don’t expect us to be a retail bank or a wealth management company. We will remain a corporate bank, a capital markets player, a global markets player, research and advisory, and for that it’s critical to have teams that can help people understand the market. You have to understand in the US a $2 billion revenue company is a mid-size company and they may not be able to understand or comprehend what’s going on in India, they don’t understand the nuances of the market. But our teams can get on a phone call and help explain what’s going on. These mid-size companies are also doing or want to do businesses around the world. They also need to understand these trends.