Bar­clays to shut cash eq­ui­ties unit in In­dia

The Pak Banker - - BUSINESS -

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 pre­tax 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 fixed­in­come 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 UKbased 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 Rs.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.

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