| The more the merrier
Mumbai, Dec. 1: HSBC will look at acquiring minority stakes in Indian banks as part of its strategy to boost its presence in the country. The bank is open to take stakes even in a couple of entities, said HSBC CEO-designate Micheal R. P. Smith today.
This announcement is significant since it is for the first time that a top-ranking official of the bank has made public its intention to pick up stakes in domestic banks, a vital step towards inorganic growth. Till now, the bank was largely looking at growing organically. Most of the foreign banks have been stressing on having a majority stake in domestic banks as the pivotal point in growing inorganically.
Smith said though the bank has been looking at organic growth, the path has its own limitations. On certain regulatory limitations in the domestic banking system, he said, “We have to be realistic and also respect local regulations.”
The ING Group has been the lone example of a foreign bank taking control of a domestic private sector bank. The group had inked a deal with GMR Group, the Indian promoters of Vysya Bank Ltd, to buy their 23.99 per cent stake for over Rs 340 crore.
Sources said foreign banks like HSBC are eyeing minority stakes in Indian banks due to extant regulations that prevent them from having a complete control of an existing bank.
HSBC wants to acquire a minority stake before decks are cleared for a complete control.
According to banking analysts, some of the existing private sector banks that could provide excellent opportunities for HSBC include Federal Bank and South Indian Bank. “There are banks that have a good presence in select regions. These could be good strategic picks,” an analyst said. Smith, however, added that if the bank were to find that its investments are not yielding adequate returns, it will not hesitate to divest the stake.
In the past couple of years, HSBC has been enhancing its presence in the country. In August, senior officials of the bank had divulged its intention to expand its presence in India by venturing into new areas of business, including insurance broking and pension funds when the sector is liberalised.
In India, HSBC offers various products and services to its commercial banking clients and retail customers. Its entities in India include HSBC Asset Management (India), HSBC Electronic Data Processing (India) and HSBC Insurance Brokers (India).