HSBC Holdings plc HSBC is closing its Indian private banking operations. The bank recently conveyed its decision to the staff through an e-mail.
HSBC intends to move its private banking employees to the Premier banking business under its retail bank. Further, the company will offer its clients a choice to move their accounts to its Premier business, wherever applicable. This process is projected to be completed by Mar 2016.
Notably, HSBC’s private banking business targets clients with a balance of roughly $1 million, while its Premier banking business focuses on customers with $37,500. The company will invest in the Indian Premier business to enhance its product range.
HSBC’s decision is expected to lead to nearly 70 job cuts. The company spokesperson, while confirming the latest development, said “After a strategic review of global private banking operations in India, we have decided to close the business.”
While HSBC provided cost control, as part of wider global restructuring, as the reason for shuttering operations, we believe there are other motives as well. Let’s have a look at those.
HSBC’s Indian operations have been under investigation for alleged violation of anti-money laundering probe. So, this could be one of the reasons for the closure of private banking business.
Additionally, intense competition in India’s wealth management sector might be another ground. Several domestic wealth managers are expanding through hiring and opening offices in smaller cities, seeking to tap growing numbers of new millionaires. This has exerted further pressure on foreign banks as they are already grappling with higher wages and compliance expenses.
Notably, we believe that this was the primary reason behind closure/divestiture of Morgan Stanley MS and The Royal Bank of Scotland Group plc RBS private banking units in India.
Currently, HSBC carries a Zacks Rank #3 (Hold). A better-ranked foreign bank is Banco Macro S.A. BMA, sporting a Zacks Rank #1 (Strong Buy).
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