Home / Industry / Banking /  Barclays to shut cash equities unit in India

Mumbai: Barclays Plc will shut its cash equities division in India, in line with a decision to exit this business across the Asian region, said two people familiar with the developments.

It will mean that the UK-based bank will no longer offer services such as equities research and equity capital market services in India and across Asia, they said, requesting anonymity.

The decision will mean the loss of about two dozen jobs at Barclays India, a process that was initiated on Thursday.

“The thinking is that the cash equities wallet is shrinking and consolidating in the hands of the top two or three players in the markets. It takes a long time to scale up the business in a profitable manner," said one of the two people cited above. “We are living in a time when capital is scarce and the ability to invest in future growth is limited, so you have to pick up and choose the businesses you want to be in."

Barclays declined to comment on the developments.

The decision to do away with the equities business is in line with the bank’s strategy across Asia. Earlier on Thursday, Bloomberg News reported that Barclays will cut 1,000 jobs worldwide and exit several Asian countries. The bank plans to cut about 230 jobs in the Asia-Pacific, the report said.

The cuts come soon after a new chief executive officer was appointed at Barclays. Jes Staley took over as CEO in December after Anthony Jenkins was asked to leave last summer.

In the quarter ended September, Barclays reported a 10% drop in its pre-tax profit to £1.4 billion. The bank also said it would set aside £560 million for customer refunds and litigations. The bank will announce its annual earnings in March.

While a global restructuring at Barclays will mean an increased focus on the home market, four markets in Asia will remain key to its international strategy. This includes China and Hong Kong, Japan, Singapore and India, said the first person cited above.

In India, the bank will remain focussed on its wholesale banking business, where it continues to service highly rated domestic and multinational clients. It will also continue a focus on the fixed-income business, where it has had a strong position.

It ranked sixth in the overall debt capital market league tables for 2015, according to market data provider Dealogic.

In the international debt capital market segment, which captures foreign currency loans and bonds raised by Indian firms, Barclays was third on the league tables in 2015.

The cash equities business, which Barclays now exits in India, was the relative newcomer in the bank’s portfolio and was started only in 2011.

“Over the long term, cash equities could have been built into a strong business, but if the choice is between keeping an old well-performing business and investing in a new business, the preference is to go with the former in the current environment," said the first person.

Barclays is not alone in shedding businesses across Asia. Most global banks, particularly European- and UK-based lenders, have been trimming to meet tighter regulations imposed in the aftermath of the global financial crisis, which have also increased the capital requirements for these banks.

In January 2015, Standard Chartered Plc decided to shut most of its equities business in India, exiting the cash equities, equity research and equity capital market businesses.

Royal Bank of Scotland Plc (RBS) is also retreating from the Indian market. It sold its wealth management business to Sanctum Wealth Management, a deal that was approved by the competition regulator last month. RBS is also close to selling its corporate banking portfolio to IDFC Bank Ltd in a deal likely to be valued at 3,000 crore, The Economic Times reported on 20 January.

“The larger trend here is that banking companies world over are focussing more on their home markets. We are living in a world where capital is scarce and banks are choosing to focus that capital on a fewer number of businesses and geographies," said Ashvin Parekh, managing partner, Ashvin Parekh Advisory Services LLP.

“In the case of foreign banks in India, they have also failed to innovate in the Indian markets and have slowly ceded space to their Indian rivals in most lucrative businesses," Parekh added.

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