By Sumeet Chatterjee
REUTERS - Standard Chartered has agreed to buy the Indian wealth management unit of Morgan Stanley, helping the British bank expand its private banking business in Asia's third-largest economy.
The sale underscores growing consolidation of Asia's wealth management industry, which is struggling with rising regulatory costs and wafer-thin advisory fees.
Morgan Stanley launched the sale of the Indian wealth management business in November after entering the fiercely competitive market about four years ago. The U.S. bank plans to focus now on institutional securities, investment banking and asset management in India.
The wealth management unit has assets under management of around $800 million and Standard Chartered will buy about 70 percent of the book, two sources with direct knowledge of the deal said.
It will pay a little less than $5 million for the business after closure of the deal in about six months' time, the sources told Reuters.
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Standard Chartered and Morgan Stanley spokesmen contacted by Reuters declined to comment on the details of the deal.
Standard Chartered launched its wealth management unit in India in 2007. It manages about $3 billion worth of assets in its Indian private banking business, making it one of the country's biggest wealth managers.
The London-based bank has a stock market listing in India and competes there with Royal Bank of Scotland, Barclays, Citigroup and several domestic wealth management firms.
Competition has grown and weak markets have squeezed revenue, with growth opportunities limited by regulations that restrict product offerings.
Foreign players scrambled to enter the market a few years ago and ramped up operations aggressively to take advantage of robust economic growth, only to find themselves struggling.
The number of millionaires in India shrank by 18 percent to 125,500 in 2011, according to Capgemini and RBC Wealth Management's world wealth report, marking the first decline since 2008.
In the longer term, wealth is expected to grow steadily in Asia, with relatively strong economic growth creating more millionaires in India, China and across the region, a trend that some foreign banks aim to harness.
Morgan Stanley said in a statement on Monday that the sale of its onshore Indian wealth management unit would be completed by the end of the year. The business accounted for less than 5 percent of its Indian revenue in 2012, it said.
(Editing by Tom Pfeiffer)