HSBC to close India private banking unit as competition grows

[General Observer]

HSBC Holdings Plc (HSBA.L) is closing its private banking unit in India as part of its group strategy, the bank said, marking the exit of another foreign bank from the cut-throat wealth management business in Asia's third-largest economy.

The bank would offer private banking clients the choice to move to HSBC Premier, the bank's global retail banking and wealth management platform, a Mumbai-based spokesman said. The process is likely to be completed in the first quarter of 2016.

"After a strategic review of the global private banking operations in India, we have decided to close the business," the spokesman said. "This marks further progress in the HSBC group strategy to simplify business and deliver sustainable growth."

Many foreign wealth managers scrambled to open up shop in India a few years ago lured by its long-term growth prospects.

Even though India has been minting millionaires at a strong pace, it has failed to translate into profits for the foreign wealth managers that have set up teams of well-paid bankers to help manage those riches.

Banks including Royal Bank of Scotland (RBS.L) and Morgan Stanley (MS.N) have recently sold their onshore India private banking units as part of their global business restructuring.

HSBC's private banking business in India has about 70 staff, a source with direct knowledge of the development said, adding many of them would be redeployed to other bank operations.

The bank employs about 32,000 people - many of them in its back-office outsourcing unit - in India, where it also offers corporate, retail and investment banking services.

The value of assets managed by HSBC's private banking unit in India was not immediately clear, but wealth management industry sources said the bank was not one of the top three players in the segment.

The bank posted pre-tax profit of $7 million in its India private banking business in the six months to June, accounting for 4.5 percent of the Asia private banking business and up from $5 million in the same period a year ago.

HSBC, Europe's biggest lender, did not immediately respond to a Reuters request for comment on its private banking staff in India and its market position.

HSBC private banking in India lacked scale and closing it ties in with a review the bank is undertaking of operations around the world - selling or closing units where it lacks scale or the businesses are unprofitable, people familiar with the move said.

HSBC's decision to exit India private banking business comes at a time when India's homegrown wealth managers are hiring more staff and expanding in smaller cities, seeking to attract rising numbers of new millionaires.

These local firms already control some 75 percent of the market, industry executives say, and their expansion plans will put more pressure on the global banks, which are struggling with higher wages and compliance costs, and a narrower client base.

India taxmen in February searched the local headquarters of HSBC as part of a probe related to allegations that the bank's Swiss business helped clients dodge taxes. The move came after details of its Swiss private banking operations and top clients were widely published in the media.

(Reporting by Sumeet Chatterjee; Additional reporting by Steve Slater in LONDON and Saeed Azhar in SINGAPORE; Editing by Miral Fahmy, Muralikumar Anantharaman and Adrian Croft)

HSBC to close India private banking unit as competition grows| Reuters

 

[Jai Bharat]

Can't tell if this is good or bad.

 

[graphican]

Looks like Indian financial bubble is about to bust. When Morgan Stanley leaves a country, that is not without reason. Tough competition is not a justification for the departure of multiple banks.

 

[Jai Bharat]

Why would a lack of return on investment for foreign banks be a good thing? They're all pulling out for crying oud loud.

Because:

HSBC's decision to exit India private banking business comes at a time when India's homegrown wealth managers are hiring more staff and expanding in smaller cities, seeking to attract rising numbers of new millionaires.

These local firms already control some 75 percent of the market, industry executives say, and their expansion plans will put more pressure on the global banks, which are struggling with higher wages and compliance costs, and a narrower client base.

India taxmen in February searched the local headquarters of HSBC as part of a probe related to allegations that the bank's Swiss business helped clients dodge taxes. The move came after details of its Swiss private banking operations and top clients were widely published in the media.

Because this is during a time period of wealth expansion in India which ought to be a time when increase in deposits and banking ought to occur. It seems like the demand for private banking is growing, just that local players are now taking in the dough instead of the foreign private banks. Meanwhile, the foreign players advantages of money laundering and tax evasion is coming to an end, finally levelling the playing field.

Reading it again, it sounds like a blessing if anything, and a very good sign of things to come.

 

[kadamba-warrior]

That is an assumption. Whether it be corruption and the loss of investment in India from foreign firms remain unclear. That is the impression that I get from the article.

The title itself reads that HSBC is pulling out due competition from local private banks. To suggest anything other than that, is an assumption! As per the article, anyway!