Mumbai: The beleaguered Royal Bank of Scotland Plc., or RBS, on Thursday declared that it would move its India retail and commercial?banking?operations into a for-sale, non-core division, thus effectively declaring its intention to exit that business.
The announcement came as part of the UK-based bank’s annual results, which showed a record £24.1 billion (Rs1.73 trillion) loss for fiscal 2008. The bank follows a calendar year for financial results.
RBS, which is largely owned by the UK government, is selling non-core businesses in select markets to raise funds. In India, it is present through 31 branches and has 10,000 employees on account of the acquisition of the Asian operations of ABN Amro Bank NV in 2007. The acquisition was through a consortium, along with Fortis Group of the UK and Banco Santander SA of Spain.
RBS’ India assets are part of its Asia retail and commercial banking operations, which will also be designated non-core. The retail and commercial banking business in India employs 2,500.
Stephen Hester, group chief executive, said: “India is a very strong technology and administration centre for us. This facility assists the rest of the world. I expect that to continue and expand.” He declined to say if RBS would be exiting India through the sale of banking operations it acquired from ABN Amro.
While confirming that India’s retail and commercial banking would now be part of non-core assets, Hester said: “We will be examining how other people can invest in this business as we are restricting our activities due to the current circumstance we are in.”
Australia and New Zealand Banking Group Ltd (ANZ), Hongkong and Shanghai Banking Corp. Ltd and Standard Chartered Bank Plc. are in the race to acquire ABN Amro’s operations in Asia and India, said a investment banker familiar with the development.
RBS’ Asia retail and commercial banking is present in India, Pakistan, China, Taiwan, Hong Kong, and Singapore, among other markets. It provides financial services across four segments: affluent banking, cards and consumer finance, business banking and international wealth management.
The Asia business reported an operating loss of £113 million (Rs8.12 billion) in 2008, against an operating loss of £20 million the previous fiscal. The British bank, in an analyst presentation, said: “The bank saw good growth in the private banking and cards and consumer finance business, while increased business investment was driving cost growth.” It, however, added that “the?increased provisioning was related primarily to Indian franchise”.
Impairments in the Asia retail and commercial banking increased by 44% to £171 million (Rs12.28 billion), reflecting an increase in provisioning levels across a number of consumer finance markets in the region, the bank said in a statement.