Mumbai: Frits Seegers, chief executive, global retail and commercial banking, Barclays Bank Plc., expects the British bank’s Indian operations to be profitable by next year.
The bank’s emerging markets business, which includes India, posted a loss before tax of £86 million (around Rs690 crore) for the half-year ended 30 June against a profit before tax of £52 million in the first half of 2008. Currently, the Indian operations is in loss but the bank does not reveal country-specific profit or loss numbers.
The impairment charges on account of rising non-performing loans in the emerging markets business have increased 44.89% to £213 million against £147 million, with a substantial increase in the retail segment, particularly in India and the United Arab Emirates (UAE) , due to the deteriorating credit environment.
“Strong income growth across all regions was offset by significantly increased retail impairment in India and the UAE and the cost of investment in the new markets of Pakistan and Indonesia,” the bank said in its income statement.
But Seegers does not have any plan to go slow in India. “India continues to be the fastest growing country in the world and its a necessity for Barclays to be present here,” he said.
Barclays, which started its retail business in India in 2007, invested £240 million over the past few years in its Indian banking arm and a non-banking finance company.
“Once the business starts making profits, there will be no need to pump in capital,” Seegers added.
The bank has cut its staff strength in emerging markets by 1,800 to 18,300. “In India the bank has 15,000 employees including 10,000 third party (sales force). We plan to recruit about 2,000 people more. We are committed to investing in India,” said Seegers.
Barclays, according to him, will reinvest in emerging markets in the fastest pace in the coming years. “Our goal is that the profit contribution of our international activities will, in time, equal that of the UK businesses,” Seegers said.
The bank currently operates through five branches in Mumbai, New Delhi, Kanchipuram near Chennai, Junagarh in Gujarat and Neelamangala near Bangalore. It has recently opened its sixth branch at Ahmednagar in Maharashtra.
In India, the bank will continue to build its liabilities business and extend personal loans, credit card loans and commercial loans. Considering the regulatory restrictions on branch expansion, the bank will use retail sales agents, online touch points and mobile banking to garner deposits, Seegers said.
He refused to share any impairment numbers for India but said this is among the lowest compared with its peers. “We have arrived in this market a couple of years ago. The business is maturing and hence the impairments are bound to be high. In early 2008, the bank detected the tightening credit environment and accordingly tightened its credit conditions,” said Seegers.
The bank’s global retail and commercial banking in India is now run by Ram Gopal, who holds the dual charge of chief operating officer and interim chief executive officer after Samir Bhatia resigned in May. It expects to appoint a new chief executive shortly.