If Barclays Plc. ends up acquiring ABN Amro Holding NV in what will amount to the world’s biggest financial services acquisition, the deal could jumpstart the British bank’s commercial and retail banking operations in India, local banking industry experts say.
Barclays, which confirmed it was holding “exclusive” talks with the Dutch bank, has been investing aggressively in India as it looks to pick up stakes in local banks and non-banking finance companies. However, it has not yet started its commercial banking operations for which it has earmarked $70 million in 2007.
“Though the particulars of this deal are not clear yet, this makes the job easier for Barclays as it gets a ready platform to take off. It would have taken years to get the volume of business that ABN Amro’s India operations would offer the British bank,” says a senior banker from a foreign bank operating in India who does not wish to be identified. ABN Amro has a customer base of 1.5 million in India. Globally, the two banks would have 47 million customers.
If the deal is consummated, it wouldn’t change the rankings of foreign banks in India. ABN Amro is the fourth-largest in terms of assets after Standard Chartered, Citibank and HSBC. Barclays Capital, the investment banking arm of Barclays Plc., has been present in India since 1979 and has a successful track record in investment banking for Indian corporations.
Barclays, which had earlier expressed intentions of growing aggressively in emerging markets, had obtained government approvals to set up three branches in India. Out of these, one is operational in Mumbai and the other two are to start in the south. ABN Amro, on the other hand, has 16 branches across India. It started its operations in 1920 as financiers to Indian diamond traders.
Apart from its focus on banking, where it offers a whole range of products including home loans, car loans, credit card and personal loans, ABN Amro also operates in India through other companies. For instance, it provides investment banking advisory services, primary dealership through ABN Amro Securities and equity broking services to foreign institutional investors through ABN Amro Asia Equities. In this segment, it has a 5% market share.
In the asset management business ABN Amro manages Rs5,620 crore and is the 18th-largest player among the 32 mutual funds in India. Apart from this, ABN Amro Private Banking provides advisory and wealth management services to the bank’s wealthy clients, while ABN Amro Van Gogh Preferred Banking caters to the high net-worth clients of the bank.
Banking analysts say that out of all these complementary businesses, Barclays stands to gain the most from ABN’s wealth management business. The British bank had announced in late 2006 that it would hire up to 50 people to focus on this area. Barclays has also been keen to introduce its Barclaycard in India to tap the growing appetite for credit cards.
Barclays has also been picking minor stakes in various financial entities over the years. In September 2004, it acquired a 4.5% equity stake in UTI Bank where HSBC too now holds about 5% stake. Last September, Barclays acquired 99.28% of Rank Credits and Investment Ltd, a non-banking finance company, and followed it up with an acquisition of 4.7% equity stake in Infrastructure Development Finance Corporation.
ABN’s shares rose 71 cents, or 2.4%, to €30.65 at 3.22pm in Amsterdam, giving the company a market value of €58.5 billion.