‘Global Financial Crisis’ continues to bite Royal Bank of Scotland’. Partly nationalized UK bank RBS continues its retreat from overseas market. It is going to sell its Indian retail and commercial operations to HSBC Holdings. HSBS Holdings (Hong Kong and Shanghai Banking Corporation ltd.) has revealed information to this effect according to Reuters. HSBC said it would pay a premium of up to $95 million over the tangible net asset value of the businesses when the deal completes. The deal is expected to be completed in the first half of next year. If bad debts in the RBS’ business increase in the next two years the price will be reduced.
HSBC would also buy RBS’ retail and small & medium business in China Malaysia according to other sources. Standard Chartered Bank held talks with RBS to acquire its business in the three countries. The talks have failed due to differences over valuation of assets. RBS official in India is said to have told the media that the both banks have already signed the deal but acquisition process will continue according regulatory approval. Success of acquisition of India’s businesses is attributed to RBI’s approval to transfer RBS’ assets to HSBC. RBS is said to have 1.1 million customers, over 1800 staff spread across 31 branches. The portfolios had a gross asset value of $1.8 billion as at the end of March. HSBC currently has about 2 million customers and 50 branches across 29 cities in the hard-to-enter Indian market. At present RBS is owned by the UK government up to 83 percent.
The UK government has sold a string of no-core businesses in recent weeks as it refocuses on its key strengths. Actually RBS was on international expansion drive before it collapsed due to financial crisis. The UK government has, in the last 14 months, raised over $2.5 billion from exiting or selling over 20 businesses. The core businesses of ABN Amro -corporate banking, markets and treasury, equity capital markets, merger and acquisitions, syndicated loans, debt capital markets, trade finance and cash payments- acquired by RBS in 2007 and continuing under the same name in India, would continue to operate as usual.