RBS is to exit all banking markets in India, signalling the death knell for its trade finance business in Asia Pacific.
While some of the bank’s existing “long tail” business will mature long after its physical presence expires, a spokesperson for the bank confirms to GTR that RBS will no longer offer trade finance services to clients anywhere in the Asia Pacific region.
It will retain a small sales staff team in Japan, Singapore and Hong Kong, dealing with institutional clients, while it will also maintain its large back office function in India, offering back office services to its business units in its core markets.
“After examining a number of potential sale options for our banking business in India, we have concluded that it is not feasible to sell the business in its entirety. We will now look at other options which may include a wind down or sale of individual parts of the business, and we will communicate to clients accordingly,” Ronald Wong, the bank’s head of communications for Asia Pacific, says.
While there is no timeline yet placed on the bank’s Indian exit, existing clients have been notified and told to source alternative banking relations. The bank has been seeking buyers since last year and while it’s been reported that DBS of Singapore and IDFC, a local bank, showed interest, the bank has effectively decided to cut its losses.
It’s been estimated that 700 jobs will be lost, although RBS would not confirm that figure. It marks the latest catastrophic chapter in the bank’s recent history, much of which can be traced back to its disastrous purchase of ABN Amro in 2007, from which it inherited much of its Indian business.
The takeover placed RBS in a perilous position through the global financial crisis, when it was found to have wafer thin levels of buffer capital and it eventually required a bailout from the UK government that meant that it was 81% owned by the British taxpayer – a move that led to a series of scything cutbacks overseas.
After reporting a loss of US$5.39bn in 2014, the bank announced plans to “substantially reduce” its presence in Asia and the US and that it would bring the total markets in which it operates to below 15. Early last year, it exited the Middle East and Africa
“The decision to close the Indian business is ‘technically where you draw the line’ on RBS’ trade finance operations in Asia.”
The decision to close the Indian business is “technically where you draw the line” on RBS’ trade finance business in Asia, which was one of its largest markets in the region. GTR understands that transactional staff will remain, but are “part of an exit plan”.
RBS’ exit from India comes at a time at which international banks are finding it difficult to compete with local banks on pricing. On a recent visit to Mumbai, GTR was told that pricing levels in the Indian trade finance market are “unsustainable for international banks” by a senior trade banker.
Local banks, more willing to lend in local currency, however, have been competing for business in a “cutthroat” manner – leading one senior source to describe it as “a race to the bottom”.
It also comes at a time at which many international banks are reevaluating their presence and structures in the Asian market in general. Today, it has also been reported that Standard Chartered is looking to sell US$4.4bn in Asian assets, including billions of dollars of stressed loans extended to companies in India.
In November 2015, ANZ confirmed to this magazine that it was exiting Asian trade finance “where we can’t deliver appropriate value and return”, after reporting its lowest profit growth since the financial crisis.
Speaking exclusively to GTR, head of global transaction banking at the bank Carole Berndt clarified comments made by CEO Mike Smith and CFO Shayne Elliott, which stated the bank would refocus its Asian operations around higher-value propositions.