Chillin' out till it needs to be funded
As HSBC , Citi and SCB continue to target large private banking accounts in India they are unlikely to step up price wars in retail as all 3 are struggling to break-even. Others hardly have retail operations at all, Deutsche Bank also having sold its cards division to Indusind. Savings bank rates in the meantime have been upped at the new premier competitors, the crop of private banks given licenses earlier this decade and last, with Kotak and Yes offering 6% on the daily savings balance computation alongwith Indusind esp on deposits above $2000 (Rs 1 lakh would translate to $20k in PPP terms)
SCB’s 100 and HSBC’s 46 branches (incl any RBS branches allowed in 2012) as well as Citi’s 15 branches are about to break even in retail after the 2008 purge. Corporate and Transaction Banking continues to bely hopes in the September and December quarters as the falling rupee makes syndications in ECB/ FCCB impossible to justify for most India corporates hurting from the forex risk already on board With Barclays and BofA non serious contenders to expand in India and corporate and advisory squeezed, Foreign retail banks wll grow in the depleted ‘supply’ scenarios outside the cosmopolitan centers where there is enough extra “premium ascribed to banking with MNC banks” esp as they offer integrated MF investments and competitive online accounts/ salary account packages but without disturbng their fee streams from balance charges, debit fees and lower savings bank rates.
As FDI investments exceed $20 bln in 7-8 months, FII interest is already returning to India and as and when it does, larger global businesses will come through these foreign banks only, while the competition is with the growing Yuan and Dollar business in China and Hongkong
However growth in personal loans and other unsecured lending in the festive season as also the jump in debit card spends is likely to sustain With structured transactions their coup de detat in the Indian market their retail CASA ratios and “real lending” remains a lower priority with a CASA of nearly 45% in all 3 cases
SCB also lost minute amounts being bullish on the rupee in September 2011. Dealmakers have been shifting mandates and jobs at foreign investment bank units with revenues down 40% for the year and the Indian market fee reduced to less than $500 mln in 2011-12
However, the talent is likely to stay with India / Asia given the new FDi regulations in retail and expected soon in aviation. the interest from foreign PE firms also remains only temporarily suspended as FDI operational concerns and issues with standard safety clauses / control clauses awaited for resolution ( nomination of independent directors and ROFR could trigger requirements for 26% open offer)