Mumbai: One of the world’s biggest banks Hongkong and Shanghai Banking Corp. (HSBC) has emerged as a strong contender for the Indian and other Asian assets of Royal Bank of Scotland (RBS), ahead of Australia and New Zealand Banking Group Ltd (ANZ), according to people familiar with the development who didn’t want to be named.
Monday was the last day for submitting bids. ANZ appears to have lost interest in acquiring the assets of RBS because it may be close to winning its own banking licence to operate in India.
“ANZ has placed the weakest bid in terms of value for RBS assets,” said an investment banking executive who didn’t want to be named. “HSBC and Standard Chartered Bank have also submitted their bids.” He refused to disclose the value of the bids.
RBS is selling businesses designated as non-core 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.
In February, RBS 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 retail and commercial banking business in India employs 2,500.
“At present, HSBC has emerged as a strong contender for the bank (RBS) assets in India,” said an official at ABN Amro Bank who didn’t want to be named.
On 29 April, when ANZ Bank announced its results, chief executive Mike Smith said in an analyst call, “We are quite close, we feel, to getting a licence approved in India. India is in an election cycle currently but we are quite optimistic of getting a positive result.”
Responding to queries from Mint on the bid placed for RBS assets, ANZ spokesman Paul Edwards said in an email that “…ANZ understands it is one of a number of parties involved in the RBS Asia sale process. That process is at an early stage and is subject to a number of commercial and regulatory uncertainties.”
He denied that the economic downturn and higher provisions had affected the bank’s investment capabilities outside its home market.
“We...(are) in a strong position to look at opportunities which are consistent with our strategy to create a ‘super regional’ bank focused on the Asia-Pacific region,” he said, declining further comment on the RBS Asia sale process.
A record £24.1 billion (Rs1.73 trillion) loss for fiscal 2008 forced RBS to hive off the Asian operations, including in India, that it designated non-core. In March, RBS group chairman Philip Hampton met Reserve Bank of India (RBI) officials to formally start the exercise.
“The Indian branch network is critical for the valuation of Asian assets of RBS as foreign banks do not find it easy to secure branch licences here even though RBI is quite liberal in granting such licences,” said a second ABN Amro official who also didn’t want to be named.
“This branch network has pushed up the prices of the Asian assets and HSBC and Standard Chartered Bank are the only two players who continue to be in good stead in the valuation game,” the official added.
Under World Trade Organization norms, RBI is expected to issue 12 branch licences annually. It typically issues about 14 licences every year, but foreign banks want more.