- Lender says it will shut 24 of 50 outlets in the country
- CEO Gulliver paring back global network to cut costs
HSBC Holdings Plc plans to shut almost half its branches in India and rely more on digital banking to expand its consumer business in the South Asian nation.
The London-based bank will cut 24 of its 50 branches as it seeks “the right mix of digital versus physical branch distribution,” according to an e-mailed statement on Thursday. The outlets to be closed account for less than 10 percent of HSBC’s retail customer base in India, the lender said in the statement.
“This move suits HSBC as their target retail customers are mostly in urban centers and are affluent with access to digital-banking channels,” Rethish Varma, head of research at Bengaluru-based Aditya Trading Solutions Ltd., said by phone. “Most of the banks in India will need to continue to scale up their branch network” because many customers have limited access to electronic banking, he said.
Chief Executive Officer Stuart Gulliver is paring back HSBC’s sprawling global network and shutting money-losing businesses to improve earnings hurt by compliance costs. Since 2011, the bank has slashed more than 87,000 positions, exited at least 80 businesses and reduced its footprint to about 71 countries and territories from 88.
HSBC said it remains committed to India, where it is also shutting its global private-banking operations. The country was the fourth-biggest contributor to group earnings before tax in 2015.
Pretax profit for the India branches rose 6.7 percent to 28.7 billion rupees ($426 million) in the year ended March 2015, filings from the bank show.
Among HSBC’s foreign competitors in India, Singapore’s DBS Group Holdings Ltd. is also pursuing a digital strategy in the country, with the announcement of a mobile-banking initiative last month. DBS, Southeast Asia’s largest lender, has sought central-bank approval to set up a wholly owned unit in India, where it has 12 branches.
State Bank of India and ICICI Bank Ltd. have been leading the push by Indian lenders into digital banking. SBI, which has launched as many as eight banking applications, accounted for about 38 percent of India’s mobile-banking transactions and ICICI had 18 percent as of December, Reserve Bank of India data show.
HSBC’s origins in India date back to 1853 when the Mercantile Bank of India was established in Mumbai, according to the U.K. lender’s website. HSBC bought Mercantile Bank in 1959 and now offers products and services to corporate and retail customers. HSBC set up India’s first automated teller machine in 1987, according to the website.