HSBC to invest $150 m in retail business, plans NBFC

The Hongkong and Shanghai Banking Corporation (HSBC) will infuse $150 million of capital in its Indian operations this month to support growth prospects in retail and commercial banking business in 2005.

HSBC is also looking at establishing a wholly owned non-banking finance company (NBFC) for driving its retail growth.

On top of the capital infusion, HSBC will retain its remittable surplus for 2003-04 amounting to $30 million and an expected sum of $63 million for the current financial year by June-July 2005.

This will boost the bank's capital adequacy ratio (CAR), said HSBC group general manager and chief executive officer (CEO) of India operations, Niall S K Booker.

HSBC India's net profit has increased by 35 per cent in 2004. The CAR of HSBC's Indian operations would rise to 13.5 per cent after the capital infusion from 10 per cent at the end of December 2004.

HSBC had infused a capital of $150 million in its Indian operations in March 2003. The latest capital infusion will take the total capital of the bank's India operations to $600 million. With Indian corporates going global and requiring huge funds, the $243 million capital will take care of HSBC's requirement for the next 12-18 months, said Booker.

It is planning to set up an NBFC to widen the distribution set-up. This is in line with its focus on retail growth. Its retail operations have seen immense growth and contribute to 42 per cent of total loans, rising from 27 per cent in 2002 when Booker took charge.

"We are looking at it from the customer perspective," said Booker. The minimum capital requirement for setting up an NBFC is $50 million.

HSBC's home loan portfolio grew by 85 per cent to Rs 3,200 crore as on December 31, 2004. HSBC India's total assets book at the end of December 2004 stood at Rs 27,000 crore, the bank's area financial controller, Anurag Adlakha, said.

Booker said HSBC India has seen a decline in non-performing assets with delinquencies in home loans being less than expected and in credit cards 'much below' the double-digit ratio.

HSBC will open its 40th branch in Nagpur and has approvals for branches in Indore, Mysore and west Delhi, said HSBC India deputy CEO Naina Lal Kidwai.

HSBC India added 750 people in 2004, taking the total employee strength of the group in the country to over 12,000 at the end of December 2004.