Mumbai: UK-based Royal Bank of Scotland Group Plc., or RBS, has valued ABN Amro Bank NV’s India operations as $500-600 million (Rs2,490-2,988 crore), according to a senior banker close to the matter.
RBS, along with Fortis Group of the UK and Banco Santander SA of Spain, had bought the Asian operations of ABN Amro in 2007, but has now put it on sale as it struggles with huge losses that recently required a bailout by the British government. The beleaguered bank is now trying to raise money by selling parts of its business.
The Financial Times reported on Monday that RBS plans to reduce its balance sheet by a quarter over the next three to five years. The entire Asian business has been valued at $3-4 billion, said the banker.
Staying focused: An ABN Amro Bank branch in New Delhi. RBS, which bought ABN Amro in 2007, plans to sell the bank in an effort to significantly downsize its balance sheet by shedding off non-core operations. Ramesh Pathania / Mint
“India will be the key in the entire (Asian) deal as the banking licence here is very valuable. The 31 branch licences that ABN Amro Bank has in the country are valuable assets,” the banker said, asking not to be named as a global review of what the bank plans to hold on to and what it plans to sell is currently under way. “India will decide the fate of the Asian deal and will also play a key role in deciding if the bank will sell select assets or the entire operation in Asia.” Mint could not independently confirm the valuation.
RBS said any decision on its sale plans would be announced after they are finalized. “We have launched a strategic review of our business which will be completed by end of Q2, 2009. We will be providing an update when we report our year-end results on 26 February,” V. Vasantha Kumar, ABN Amro’s India head of marketing and communications, said in an email reply. “We will not be responding to press or market speculation on individual countries or businesses.”
ABN Amro has been in India since 1920. Its loan assets in India grew 28% to Rs36,617 crore in fiscal 2008, from Rs28,518 crore in 2007. The Indian operations reported a 27% decline in net profit for 2007-08 to Rs280.60 crore, from Rs385.30 crore in the previous fiscal year. It has 9,000 employees in the country.
Stephen Hester, chief executive of RBS, is scheduled to announce the findings of the global review and the bank’s full-year results on Thursday.
As a result of the slowdown and increasing pressure on profitability, the Edinburgh- headquartered RBS had said in January that it might end up posting a loss of up to £28 billion (Rs2.02 trillion) in 2008.
RBS is 70% owned by the UK government, which has infused fresh capital in it. It is expected to sell parts or all of its Asian business.
ABN Amro has operations in India, Pakistan, Hong Kong, China, Taiwan, Malaysia, Indonesia, Singapore, Vietnam and Japan.
“It’s clear that Royal Bank of Scotland is going to significantly downsize and shrink their balance sheet. This means that it will likely get rid of “non-core” operations and, according to press reports in the UK, this implies it will concentrate on its United Kingdom and United States assets,” Roger Lawson, communications director at the United Kingdom Shareholders’ Association, an independent organization that represents the interests of private shareholders in the UK, said in an email reply to Mint. “Operations in the Far East and Asia may be disposed of.”
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, the banker mentioned earlier said.
ANZ had exited India in 2000, after selling its Grindlays Bank unit to Standard Chartered for $1.34 billion. The ANZ group is currently present in India through a wholly owned subsidiary, ANZ Capital Pvt. Ltd, a non-banking finance company.
“RBI (Reserve Bank of India) would be very selective on which foreign banks it permits to operate in India. RBI may not be comfortable transferring 31 branches to a foreign bank and this would be a key role in structuring the Asian deal,” added the banker. ANZ currently does not have a banking licence in India.