As super-rich numbers rise, HSBC may re-enter India’s private banking space

UK-based banking giant HSBC Holdings Plc is looking to re-enter the Indian private banking segment, which it had exited in 2015. Spurring the move is the rapid growth in the number of super-rich in the country, and bull rallies in the stock market that are creating billion-dollar businesses, according to a Reuters report.

The decision also stems from HSBC’s plan to drive growth via its wealth management operations, and the Asian market. In China, it has reportedly reached top ranking in private banking, and wishes to leverage the success in neighbouring geographies. Already, Asia represents the British bank’s biggest market. Its personal banking unit, unit, meanwhile, contributed 44% of its global revenue last year.

In November 2015, HSBC had announced its plans to exit the private banking space in India following a global strategic decision. “After a strategic review of the global private banking operations in India, we have decided to close the business,” an India spokesman for the bank had said then. “This marks further progress in the HSBC group strategy to simplify business and deliver sustainable growth.”

The private banking umbrella

Investopedia defines ‘private banking’ as services that offer ‘personalised financial products’ for high networth individuals (HNIs). The umbrella term covers wealth management services including insurance, taxes, investing and portfolio management, and trust and estate planning.

Also read: Financial inclusion: How India beat China; what it means for the economy

Originally targeted at an exclusive clientele, financial institutions nowadays offer private banking services to a far wider range of customers. The increasing interest in non-traditional investment platforms among the upper middle classes, such as stocks, mutual funds and hybrid products, is believed to have created a huge private banking market in the country. It is this market that HSBC now appears to be interested in.

At HSBC, the wealth management business covers investments, insurance and asset management products. Under private banking, it targets customers with investible assets of at least $5 million, according to the bank’s website.

Strategy refresh

Reuters said that HSBC, as part of a strategy led by Group CEO Noel Quinn, is now investing $3.5 billion of fresh capital in its wealth and personal banking operations. The aim is to be Asia’s biggest wealth manager in four years.

While select foreign banks operate in India — such as Citibank, Standard Chartered Bank, Barclays Bank and Royal Bank of Scotland — not all are engaged in private banking here. At present, HSBC is catering to its Indian clients from its branches in London, Singapore and the Middle East. Reopening operations within Indian shores will not only widen its clientele but will also likely ease regulatory hitches.