In a bid to boost digital banking to develop its consumer business in the South Asian nation, HSBC Holdings plcHSBC is planning to close almost half its branches in India. The downsizing of India operations will help HSBC focus more on digital banking channels to expand its urban customer base.
The London-based bank will shut 24 of its 50 branches to achieve "the right mix of digital versus physical branch distribution," according to an e-mailed statement on Thursday. The branches to be shuttered account for less than 10% of HSBC's retail customer base in India.
Moreover, the bank's action will impact 300 of its employees, 1% of its 33,000 employees in the country. HSBC plans to consolidate from 50 branches across 29 cities to 26 branches across 14 cities in a phased manner.
A HSBC spokesperson assured that "redeployment opportunities will be accorded to the affected employees".
According to the bank's statement, the decision was taken after a strategic review of its retail banking and wealth management (RBWM) business revealed that its customers are "increasingly using digital channels for their transactions".
"India is a priority market for HSBC and we will continue to invest to achieve sustainable growth by supporting the needs of our customers," Stuart Milne, group general manager and chief executive officer of HSBC India, said in a statement.
"HSBC's RBWM business is core to the bank's franchise in India and it will continue to invest in this business. For example, the bank will soon be announcing an expanded proposition to cater to its top tier clients and further technology deployments for the benefit of its retail customers," HSBC added.
The current move comes on the heels of the bank's plan to exit its global private-banking operations in India. Also, the consolidation follows the bank's announcement of relocating 840 information technology jobs from the U.K. to lower-cost countries like India, China and Poland by Apr 2017.
In a strategic overhaul aimed at boosting profitability and overall efficiency, HSBC plans to cut thousands of jobs across the globe through branch closures and consolidation of IT and back-office operations. Also, it intends to redeploy resources to align with future growth opportunities and adjust to changes in the global operating environment.
Per a Bloomberg report, the bank has eliminated over 87,000 positions, exited at least 80 businesses and reduced its footprint to about 71 countries and territories from 88 since 2011.
A shrinking HSBC will save costs, which will aid profitability going forward. Though the same may not seem like good news for the Indian banking system in the short run, the move will push India's exposure to digital banking and fintech.
With stringent regulatory requirement and macroeconomic pressure, banks are facing increasing difficulty in boosting top-line growth. Hence, to maintain profitability, big banks including Bank of America Corporation BAC , JPMorgan Chase & Co. JPM and Barclays PLC BCS are also taking defensive measures like trimming jobs as well as closing/divesting non-core and unprofitable businesses.
Currently, HSBC holds a Zacks Rank #4 (Sell).
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