Financial year 2010 was a mixed bag for foreign banks in India. While a few returned to the growth path, most continued to deal with the fallout of the global economic downturn.

HSBC and RBS shrank their loan books at a more rapid pace than they had in the previous year, while Deutsche Bank returned to the growth path with a 47 per cent growth in advances.

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The figures for Citibank, which ended 2008-09 with the largest balance sheet and profits among foreign banks in India, are not available yet.
 

HSBC, the country’s third largest foreign bank in terms of assets, saw its net profit fall 37 per cent to Rs 810 crore in the financial year ended March 31, 2010. Its loan book shrank 15 per cent to Rs 23,474.76 crore, which follows an 8 per cent decrease in the previous year.

However, the lender is now looking to rebuild its retail loan book with a focus on home loans and credit cards, where lending was virtually at a standstill till the second half of 2009. “Our focus for 2010 is to expand our mortgages business profitably,” Rajneesh Bahl, country head, personal financial services at HSBC, had earlier told Business Standard.

RBS – earlier known in India as ABN Amro Bank – reported a net loss of Rs 104.84 crore for 2009-10. The bank has since sold its retail and SME business to HSBC and its existing presence in India is as a corporate and an investment bank.

Some portfolios such as personal loans continue to bleed for foreign lenders. For HSBC, the NPA ratio on personal loans is 18.36 per cent, while for Deutsche Bank it is 16.34 per cent compared to 9.6 per cent last year. For Barclays Bank, the NPA ratio on personal loans is a whopping 34 per cent.

A late entrant in the retail loans segment, Barclays Bank is still reeling under the effects of the downturn. The bank reported a net loss of Rs 554 crore in 2009-10 compared to a profit of Rs 30 crore last year. Over the same period, its net NPA ratio climbed from 4.59 per cent to 5.15 per cent.

Subsequently, while credit growth has picked up across the system over the past six-eight months, foreign banks have been very cautious in expanding their loan books than their domestic counterparts.

According to data released by the Reserve Bank of India (RBI), foreign banks saw their total outstanding credit fall 1.5 per cent to Rs 1,66,839 crore in the 12 months up to March 26, 2010. Over the same period, credit growth for public sector banks and private sector banks were 19.5 per cent and 11.7 per cent, respectively — both on much larger bases. For the system as a whole, credit grew at a pace of 16.7 per cent.

Till 2008, a large number of foreign banks were keen on acquiring consumer assets, especially high-yield ones such as credit cards and unsecured personal loans. A few of them even set up non-banking finance companies (NBFCs) to tap the market.

Two years on, the complexion of retail banking has changed, and unsecured loans are still an anathema for a majority of lenders. Many foreign banks such as Deutsche Bank have indefinitely put on hold their plans to open NBFCs and have instead shifted focus to the premium customers segment, where they say delinquencies have been much lower.

Since the second half of 2008, most foreign banks have virtually stopped unsecured lending to customers with whom they do not have a prior relationship. Once big players in automobile loans, Standard Chartered, Citi and HSBC are dormant in the segment at present.

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