Singapore: Asia-focused Standard Chartered Plc. is in final talks to buy a 49% stake in Indian brokerage UTI Securities, the latest bank to buy into the country’s hot brokerage sector.
The deal would help Standard Chartered expand its services for wealthy customers in India, a fast-growing private banking market, by offering stock brokerage.
The Financial Times reported on Monday that the Rs140 crore ($35 million) purchase in UTI—which has about 40 branches and Rs70 crore in annual revenue—marked Standard Chartered’s return to retail stock broking in Asia after more than a decade.
“The UTI transaction is in final due diligence,” Peter Flavel, Standard Chartered’s global head of private banking, said in Singapore, adding the bank eventually wants to increase its stake in the Indian securities broker to 70%.
G. Narayanan, managing director at Securities Trading Corp. of India Ltd, UTI’s parent, confirmed the advanced talks but declined to discuss the value of the deal.
“We want to have a strategic partner to scale up the value of the company and to have a global reach,” Narayanan told Reuters in Mumbai. “That is why we have chosen a partner who has a strong capability and presence in India, that is the way it suits us.”
Standard Chartered joins a clutch of foreign players, including Citigroup, Merrill Lynch and BNP Paribas that have invested in India’s fast-growth brokerage sector as the stock market booms.
Strategic partnership: A file photo of StanChart Bank in Mumbai. The bank is the latest entrant in India’s fast-growth brokerage sector.
India’s main stock index rose 73% in 2003, 13% in 2004, 42% in 2005 and 47% in 2006. At the end of last week, it was up 4% so far this year, but is 2.6% below its record high of 14,723.88, hit on 9 February.
Flavel, speaking at the launch of Standard Chartered’s private banking services, said its existing wealth management business—catering to individuals with investable assets of below $1 million—is growing strongly.
It contributed nearly $2 billion in revenue last year, or 40% of consumer banking business. The new private banking business, which has its headquarters in Singapore, caters to customers with $1 million to $50 million.
The UK bank that makes most of its money in Asia, will double the number of its private banking units to 20 in the next four years. It will likely open 10 private banking centers in the next two months, mainly in Asia and West Asia. Standard Chartered would hire 200-300 private bankers worldwide, bringing the total to 350-450 by 2010.
He did not say how much the bank would invest in its private banking business, but said it would be “materially accretive” to the bank’s earnings by 2009. Standard Chartered and other banks are focusing on the private banking business because of the rapid rise in the number of wealthy individuals, particularly in Asia.
At end-2005, India had 83,000 millionaires, according to a Capgemini Merrill Lynch survey, with a combined wealth of $290 billion. International players, including UBS, Citigroup, and HSBC, dominate the sector.
Hiral Vora in Mumbai and Bloomberg contributed to this story.