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Barclays Bank realigns business in India

Barclays Bank realigns business in India
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First Published: Fri, Jul 15 2011. 11 13 PM IST
Updated: Fri, Jul 15 2011. 11 13 PM IST
Barclays Bank India is laying off some employees as the Indian arm of the British bank is merging its corporate banking business with Barclays Capital, the investment banking unit. The move is aimed at increasing corporate banking relationships and reducing Barclays’ non-core retail banking business in the country.
In an internal meeting on Thursday to communicate the merger decision, it was announced that 15-25 senior to middle-level executives have been asked to leave, said two officials of the bank on condition of anonymity.
The second largest British bank with £1.49 trillion in assets is restructuring its India business to focus on corporate banking.
“This recognizes the close alignment between these two businesses as they focus on serving the needs of India’s largest companies and multinationals and financial institutions,” a Barclays spokesperson said in an emailed response to questions.
Jaideep Khanna, head of the investment banking division of Barclays Capital, will lead corporate and investment banking coverage in India, the spokesperson said.
Other foreign banks operating in India such as Standard Chartered Plc, Bank of America Merrill Lynch and Citibank NA, have separate investment and corporate banking divisions.
“As a result of today’s announcement, there will, regrettably, be a small reduction in the number of corporate coverage and product bankers at Barclays. For those affected by redundancy, they will receive a fair package in context of the market,” the bank said in its reply.
At a meeting with heads of different business verticals across India in Mumbai on Thursday, managing director and country head Karan Bhagat released a blueprint for the future India business in which the bank will shed some employees, which also included non-core sectors such as retail banking, a bank employee said.
Barclays said expanding the retail business is still a priority.
“Our retail strategy remains unchanged and we are committed to building the retail business franchise in India.”
An internal plan is targeted at boosting the corporate asset book rather than the retail asset book as it expects more profits from the first.
Non-performing assets (NPAs) have risen in the unsecured portfolio on the retail banking side.
The bank is looking for buyers for its credit card business which is on the block after losses mounted.
In 2010, the proportion of NPAs to the total loan book size of the bank was around 10% in retail banking.
A headhunter who recruits executives for foreign and domestic banks said that the attrition in foreign banks has gone up by 10% since mid-2010, with business process outsourcing (BPO) services witnessing as high as 80% and retail banking around 30%
According to the annual Reserve Bank of India Trend and Progress of Banking in India report for fiscal 2009-10, Barclays Bank’s NPAs at Rs 1,422 crore were the second highest among foreign banks in the country behind Rs 1,683 crore of Hongkong and Shanghai Banking Corp. Ltd (HSBC). Barclays’ non-priority sectors such as credit cards and personal loans accounted for 91.3% or Rs 1,298 crore of bad loans.
Barclays’ total income was Rs 1,808 crore in 2009-10 compared with HSBC’s Rs 7,301 crore.
HSBC with 50 branches and 155 ATMs was also much larger than Barclays’ nine branches and 40 ATMs.
“If you try to build up an asset book so fast you will have problems,” said an executive director with a multinational audit and consulting firm. “The way to expand geographies by way of taking the NBFC (non-banking finance company) route is risky as the cost structure itself is high.”
Barclays Corporate includes its NBFC launched in March 2008 called Barclays Finance. It currently has a network of over 50 distribution points through its branches and Barclays Finance outlets across the country.
“Even new-generation private sector banks like Kotak Mahindra Bank Ltd and Yes Bank Ltd have taken nine to 10 years to cement their business,” said Guarav Dua, research head at brokerage Sharekhan Ltd. “So, foreign banks will at least take that much time.”
Barclays has retrenched employees in the last three years. The employee count has almost halved to 1,083 in 2009-10 from 2,068 in 2007-08, RBI data showed.
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First Published: Fri, Jul 15 2011. 11 13 PM IST