Mumbai, Oct. 17: British banking giant HSBC is shutting down its retail brokerage and depository businesses in the country. As a result, nearly 300 employees will lose their jobs.
The retail broking unit is operated under HSBC InvestDirect Securities (India) Ltd, or HISL. HSBC said as a result of the shutdown, there would be no new client additions with immediate effect. Existing clients will be informed of the date of discontinuation, and services will be offered to them till such a period.
“Impacted employees will be offered a fair and equitable severance pay in line with HSBC policy, and career transition services will be extended through a professional agency,” HSBC said in a statement issued today.
HSBC India entered the retail brokerage business more than five years ago by acquiring a 73.21 per cent stake in IL&FS Investsmart for $241.6 million. This was followed by an open offer, which took up the stake to over 93 per cent, taking its overall investment to $296.4 million. HSBC had subsequently delisted the firm.
Sources close to the foreign bank said the decision to close the retail brokerage business was taken after exploring all the options that included the sale to another entity. They said the closure was the outcome of a business review announced by the group chief executive in May 2011.
Capital market circles said HSBC’s decision to exit this business might also be because of the challenging conditions faced by brokerages in the country. The sector has been characterised by tough competition and low entry barriers that have culminated in yields taking a hit over the past few years.
Market trends over the past few years have seen turnover in the cash segment (which is more profitable) showing a decline and options, where yields are low, accounting for a major share.
HISL also offers investment advisory services to investors, high net worth individuals and traders. It also offers securities related financing that include loan against securities and IPO financing to companies in the country. Sources added that these segments would not be affected by the closure of the retail broking business.
HSBC said it would continue to invest in retail banking and wealth management, apart from other areas that include commercial banking, investment banking, asset management and insurance services. India, it reiterated, remains a priority growth market.