Cuts the branch count of its NBFC by two-thirds from 119 to 40.
After enduring the brunt of the economic downturn as a new entrant in the consumer banking space, Barclays Corporate, the loss-making retail and corporate banking unit of UK-based Barclays Bank Plc, is opting for a sharper focus.
The group has cut the branch count of its non-banking finance company (NBFC), Barclays Finance, which is housed under the Barclays Corporate unit, by two-thirds to 40 from 119.
Barclays Finance has pulled out of 36 cities and is now present in 13 locations, seven of which also have Barclays Bank branches.
“In 2008, we had a much broader presence through many more NBFC branches at that time. Now, we can be much more focused in terms of management attention,” Karan Bhagat, managing director and country head, Barclays Corporate, told Business Standard in an interview.
The group has also shifted its attention away from the mass segment to mass-affluent and wealthy customers, where it is likely to face competition from much larger foreign lenders such as Standard Chartered Bank and Citi as well as domestic banks such as HDFC Bank.
Barclays started consumer banking operations in 2007 in the midst of a retail lending boom. However, when the economic cycle turned and loans soured, a lot of domestic and foreign lenders had to book heavy losses on their retail portfolios.
For the year ended March 31, Barclays’ Indian operations reported a net loss of Rs 528 crore after writing down Rs 749 crore worth of loans. Net non-performing assets (NPAs) as a percentage of net assets were 5.15 per cent.
“The quality of our loan book has improved substantially over the last year-and-a-half. We are living with legacy assets that have higher impairment levels and we are going to have to let those assets run down,” Bhagat said.
Unsecured retail loans have been a source of distress for a number of domestic and foreign lenders. For HSBC and Deutsche Bank, the NPA ratio on personal loans as of March 31, was 18.36 per cent and 16.38 per cent, respectively, whereas for Barclays the figure was a whopping 34 per cent.
However, unlike HSBC, which has chosen to exit the segment, Barclays plans to grow its unsecured retail loan book.
“We think there is good business to be done in unsecured loans for a few reasons. The first is the size and the rate of growth of the market. Even if you target the top-end customer segment, there is a large volume of business to be done,” Bhagat said.
“Of course, it is very competitive as most banks want to play in that space. So, you have to be agile, smart and nimble,” he added.
However, the bank plans to increase the proportion of secured loans in its retail portfolio, which at present is dominated by unsecured loans.
“Our strategy now is to continue to operate in the unsecured space but to increase the proportion of secured lending in our retail asset book. In five years, our retail asset book will trend towards 50:50 on the secured and unsecured asset portfolio,” Bhagat said. Going forward, Bhagat expects corporate banking to drive asset growth.
“Asset growth will probably be faster on the corporate side of the business. I would say over two-thirds will come on the corporate side but both retail and corporate sides will grow substantially,” Bhagat said.
On the corporate side, the bank plans to increase its offerings in the cash management and syndicated loans space and introduce commodity hedging.
The group is setting up a multi-national corporate coverage team which will focus on Indian subsidiaries of foreign companies.
