Barclays India freezes retail biz

Mumbai: Barclays India, which has been rejigging its operations, today said it is freezing the retail business in the country, a move that comes a day after it sold nearly half of its credit card business to StanChart India.

"As part of our decision to consolidate and build a sustained profitable Indian business based on our competitive strengths globally, we have decided to not book new retail loans here. However, we will continue to maintain our deposit business, while focusing on wealth management, large corporates and investment banking services. All the existing loans will, of course, continue as normal," said Barclays India spokesperson through an email.

On Wednesday, StanChart India had said that the it bought 1.6 lakh of the 2-lakh standard credit card portfolio of Barclays for an undisclosed sum.

But the bank said it bought cards at a huge discount to the book value of Rs 175 crore. Barclays, which did not confirm the deal officially, has around 3 lakh customers under its credit card business.

The plan to quit the retail business will see at least 150 people getting the pink slip, according to a Barclays insider. This comes four months after Barclays, which is fighting to revive profitability, sacked 50 people here following its decision to merge the sales team of its commercial and investment banking units.

The latest job cuts will represent about 17 per cent of the bank's remaining 850 employees in the country, said the source.

It can be noted that Barclays, which will keep its branch network to satisfy the RBI requirement, is not alone in paring down its retail business. The Royal Bank of Scotland is awaiting RBI permission since July 2010 to sell its retail business to HSBC. RBS has 31 branches here.

The RBI is not ready to give the go-ahead to the deal in the current format as such a move will automatically give away 31 branches to HSBC. RBI has reportedly asked the bankers to rework the deal which would involve HSBC seeking fresh licence from the central bank for each of these 31 RBS branches.

It can be noted that as part of its business revamp plan, Barclays had discontinued its SME business in April. Again in September, the British lender had merged the sales team or the coverage team in Barclays parlance, of corporate banking and investment banking businesses, with the latter. However, the bank continues to run separate product and credit teams.

The according to industry analyst the move comes following the British lender's inability scale its retail and card business, which had not been able to make money so far.

After this rejig, Barclays' focus will be on three businesses: corporate banking which includes large local corporates, large domestic financial institutions, and multinationals, private banking or wealth management, and investment banking.

When asked for such a massive scale down, a Barclays official on condition of anonymity said, "globally we have never been a retail bank. We have been into corporate or wholesale banking along with investment banking and private wealth management."

Under the planned exit of the retail banking business, Barclays will not be taking any fresh clients on the housing, and auto loans as well as credit cards, as their current asset size in to large enough to make money.

Even though the bank officially claimed that it will continue with the deposit or liability business, this will be limited to only premium customers, said the official, "as the focus is not liabilities but assets that too large premium books."

Barclays employs around 11,000 under its three verticals in the country. Banking (1200), Barclays Shared Services, which is its in-house global off-shoring centre and Barclays Technology Centre, which is its tech outsourcing arm. Its retail banking arm, with an estimated asset size of Rs 3,200 crore, employs around 850, according to the source.

The downsizing will also see Barclays exiting Barclays Finance, the non-banking finance company launched in March 2008, apparently because the RBI is not happy with MNC banks expanding their presence through the NBFC route.

Barclays, which has nine branches and 50 distribution points under Barclays Finance in the country, had a loan book of Rs 8,311 crore as of March 2011.

The revamp is aimed at aligning the India operation with its global operations and service large domestic corporates and multinationals here for cross-border transactions, said the Barclays source, adding this is also a result of RBI not favouring foreign banks running NBFC business.

According to RBI data, Barclays' deposit base shrunk to Rs 6,740 crore last fiscal from Rs 7,075 crore the previous year.

Source: Financial Express