HSBC looks at subsidiary model to expand in India

Hong Kong and Shanghai Banking Corporation (HSBC) Bank on Wednesday said it was open to a subsidiary model for expansion in India if it was offered good opportunities. The UK-based bank also said although listing on Indian bourses was not ruled out, it was not looking at it at the moment.

“We are studying the discussion paper on subsidiary model. If it gives us more opportunities, we will be very happy to have a subsidiary. We are doing an analysis. We are not emotionally tied one way or the other,” HSBC Holdings Chairman Douglas Flint said at a media roundtable.

Last month, Reserve Bank of India (RBI) had released a discussion paper on presence of foreign banks in India and had sought comments on subsidiary-led model for foreign banks operating in India, instead of the existing branch mode of expansion. It had also proposed incentives to promote the subsidiary route.

The bank, which is currently exploring listing opportunities in Shanghai, China, said listing in India was not “off the table” if it could expand its access to a meaningful number of investors here or give it a further penetration of Indian market.

“… but this is not something we analysed being necessary to do given the fact that the liquidity of our stock is largely in Hong Kong,” Flint said, and added, “listing in Shanghai will give the bank wider recognition of its brand name”.

He said, “Last year has been our best year in India. We see huge opportunity to grow organically benefiting from huge demographics and infrastructure development in India… India is the seventh-largest contributor to HSBC’s profits. There is no reason why India can’t be among top four or top five countries for HSBC. We need to have a bigger presence than we have today.”

India has emerged as the third-most profitable market in the Asia-Pacific region for HSBC in 2010 following a year of record profit, helped by lower loan-loss charges and growth in loan portfolio. The bank’s pre-tax profit from the India business expanded 82 per cent from a year before, to $679 million.

Asked about regulatory sanctions being faced by the bank in the US, Flint said it was embarrassing and would have a bearing on its image. He said the findings of the US regulator on foreclosures were not positive and disappointing.

HSBC has stopped repossessing homes of defaulting borrowers in the US after regulatory authorities identified deficiencies in its processes. In a filing with Securities and Exchange Commission, HSBC said it would suspend foreclosures until the noted deficiencies in its process were substantially addressed.

“The industry is facing regulatory sanctions, which mean a fine. I don’t know what that will be...The real cost of that is not going to be fine or other thing, rather the fact that there will be backlog of foreclosures in US (that) we are going to have,” Flint added.

Source: Business Standard