Mumbai: Mounting non-performing loans have sharply dragged down profits at the India operations of Dutch bank ABN Amro Bank NV.
The Indian operations, which were sold to Royal Bank of Scotland Group Plc (RBS) in 2007 as part of a global acquisition, saw profits for the fiscal year ended 31 March slide a precarious 93.09% to Rs19.39 crore, compared with Rs280.99 crore in the previous fiscal.
ABN Amro Bank continues to conduct business in India under its original name despite the RBS takeover.
Battling losses: An ABN Amro branch in New Delhi. The bank has written off debt worth Rs962 crore this fiscal. Ramesh Pathania / Mint.
While provisioning for pensions in fiscal 2009 took up Rs345.73 crore, against Rs36.71 crore in 2008, non-performing loans cost the bank Rs335.92 crore, almost nine times the Rs39.80 crore the previous year.
The bank has also written off debt worth Rs962 crore this fiscal, an almost three-fold increase from last year’s Rs360 crore.
For foreign banks in India, fiscal 2009 has been a rough year, as a slowing economy has seen a rise in non-performing loans; none of the other banks, however, has seen a dip in profit.
Standard Chartered Bank’s India operations reported a 12% growth in net profit, Hongkong and Shanghai Banking Corp. Ltd (HSBC) India increased its net profit by 8%, and the India arms of Citibank NA and Barclays Bank Plc saw increases of 20% and 485% in their net profit, respectively.
Explaining the dramatic fall in profits, an ABN Amro spokesperson said: “As experienced across the banking sector in India, the profitability of our consumer finance business during 2008 was adversely impacted by extremely challenging market conditions. RBS has taken a number of steps over the last 18 months to actively manage the situation.”
The bank’s consumer banking operations, which has been put up for sale, posted an operating loss of Rs230.77 crore.
In the previous year, it made profits of Rs38.99 crore. This unit has also seen some internal changes since the announcement of the RBS acquisition. In early 2008, ABN Amro’s country executive Romesh Sobti, the longest-serving head of any foreign bank, resigned after just over a decade with the bank.
Following Sobti’s departure, a few senior executives also quit, affecting the bank’s consumer banking business, but they were quickly replaced by RBS.
“The bank has stopped growing the consumer banking book and the level of employee attrition in this business segment is very high. The management of this book has also been affected with the high level of attrition,” a senior official at the bank conceded. He did not want to be identified as he is not the official spokesperson. “The delay in the sale process of the consumer banking portfolio is also affecting the productivity of the employees and the business.”
ABN Amro’s employee strength has dipped to 3,241 in 2008-09 from 3,871. Profit per employee has also plunged to Rs62,000 in 2008-09 from Rs7.66 lakh, said data from banking regulator Reserve Bank of India.
Operating profit for the bank’s corporate and wholesale banking declined to Rs247.46 crore from Rs435.90 crore.
The bank’s losses from other operations, which include private banking and support divisions’ losses, have also widened to Rs266.27 crore from the earlier losses of Rs234.82 crore.
However, unlike the consumer division, RBS has decided to continue and grow the corporate and wholesale banking activity of ABN Amro.
RBS, which has 10,000 employees in India and 31 branches, is in talks with Standard Chartered Plc, the holding firm of Standard Chartered Bank, for the sale of retail and commercial banking assets in India, China and Malaysia. Both the parties are working on the valuation of the deal.
In August, Australia and New Zealand Banking Group (ANZ) acquired RBS’ retail and commercial banking operations in Taiwan, Singapore, Indonesia and Hong Kong for about $550 million (Rs2,640 crore). It also acquired the onshore global banking and markets and global transaction services operations, excluding securities, in the Philippines, Vietnam and Taiwan.