Royal Bank of Scotland (RBS) has announced the sale of its retail and commercial banking operations in India to Hongkong and Shanghai Banking Corporation Limited (HSBC). RBS, in which the UK government owns 83% stake post the bailout, will get up to $95 million over the tangible net asset value of the businesses when the deal completes by the first half of 2011.
The deal, which is subject to regulatory approvals, will give HSBC gross assets of £1.2 billion (US$1.8 billion) and the Risk Weighted Assets (RWAs) of £0.7 billion (US$1.1 billion). The transaction will be effected by way of an asset and liability transfer, said RBS in a release. The bank had announced sale of operations in Argentina, Kazakhstan, Pakistan and the United Arab Emirates last month.
The sale of RBS assets had attracted interest from players like Standard Chartered and Australia and New Zealand Banking Group.
This would be the second time HSBC has pursued the acquisition route to boost its India presence. In 2008, HSBC acquired 93.86% stake in retail brokerage IL&FS Investsmart for Rs 1,311 crore ($296.4 million). This firm is now called HSBC InvestDirect and is being delisted from the exchanges. HSBC also formed an insurance JV with Canara Bank and Oriental Bank of Commerce, gaining access to a distribution network of 5,000 branches and 50 million customers.
The deal with RBS will give Europe largest bank 1.1 million customer relationships in retail and commercial banking. RBS has over 1,800 staff through 31 branches across the country. HSBC will apply to the Reserve Bank of India for branch licences required to support the acquired businesses, it said in a release.
“The main focus of our strategy is on emerging markets and this acquisition is our third transaction in one of the world’s largest and fastest growing developing markets in the last two years. The combination of HSBC’s leading position in emerging markets and our distinctive financial strength mean that we are strongly placed to take advantage of opportunities like this for the benefit of customers and shareholders,” said Michael Geoghegan, HSBC Group CEO and chairman.
“We see tremendous growth potential in this country, both in helping domestic and international companies capture opportunities in India’s growing trade and investment flows with the world and in meeting the financial needs of its rising affluent consumer market,” said Naina Lal Kidwai, HSBC Group General Manager and Country Head in India.
HSBC was advised HSBC Global Banking and Markets on the transaction.