HSBC to acquire Royal Bank of Scotland in India

The Hongkong and Shanghai Banking Corporation (HSBC) reported it had agreed on a deal that will see it takeover the Royal Bank of Scotland (RBS) Group Plc’s retail and commercial businesses in India. The UK based banking corp. reported that it would pay a premium of $95 million for RBS’ retail and commercial businesses in India, about Rs 446.50 crore investments over the net asset value. However, the acquisition investment is still pending approvals from the regulatory bodies and will be concluded by end of the first half in 2011 if successful, a statement from the bank read.


RBS retail and commercial businesses in the country are estimated to have a net asset value of $1.8 billion, about Rs 8,400 crore and about 1.1 million customers, while they collectively employ more than 1,800 staff through the current 31 branches.


The deal agreed upon requires that 90% of any credit losses that are incurred on RBS’ unsecured lending portfolios over the two years subsequent to the deal’s sealing shall be deducted from the buying bid, $95 million premium price that will be remitted over the tangible asset value of the businesses.


HSBC Group Chief Executive, Michael Geoghegan, said the company’s core aim of its strategy is on emerging markets and the acquisition investment in RBS is its third transaction in the world’s biggest and fastest growing developing markets over the last two years. HSBC Global Banking and Markets advised the banking corp. over the acquisition investment. In a statement from HSBC, the bank said that in regard to seeking the necessary regulatory approvals, it would as well apply to the Reserve Bank of India (RBI) for the branch licenses to support the acquired RBS businesses.


The sale of RBS to HSBC had initially been hampered over the uncertainty with regard to the fate of RBS branches. It is understood that RBS had been on the look out for buyers for its retail and small and medium enterprises divisions in India, China and Malaysia since the inception of the units on the block back in 2009, April.


It had been widely thought that Standard Chartered Bank might stake a bid for the RBS’ businesses, but talks staled in 2009 October over disagreements on valuations and an uncertainty over the fate of RBS’ branches. HSBC is the largest banking and financial services corporation headquartered in the UK and it has been increasing its business base in India with more deals. The Royal Bank of Scotland plc is one of the largest corporations banking services with over 700 branches.


5 July 2010.