Barclays Scales Down its Indian Operations

Barclays (NYSE:BCS) has decided to cut down its retail lending business in India, which includes mortgages, consumer loans and credit card loans worth around 83 billion Rupees ($1.6 billion). ^[1] The bank has been working hard over the year to cut costs, and the recent slowdown in India’s growth rate coupled with the country’s high inflation figures may have prompted the bank to take this decision. Barclays currently has 9 branches in India providing it considerable exposure to the $1.7 trillion Asian economy compared to its competitors UBS (NYSE:UBS) and JPMorgan (NYSE:JPM) who have a single branch each. The move will allow Barclays to focus on its corporate, wealth management and institutional operations in India.

We have a $15 price estimate for Barclays’ stock, about 25% ahead of its current market price, which we attribute to the strong negative sentiments in the market against global banks, combined with uncertainty on the debt issue resolution in Europe.

See our full analysis for Barclays’ stock

Barclays announced in August that it will cut nearly 3,000 jobs across its worldwide operations – a decision aimed at reining in costs at a time where revenue sources are drying up for the banks. With regulatory requirements that kick-in next year expected to put additional pressure on margins, Barclays is leaving no stone unturned in trimming jobs. It announced last month that it has already done away with 3,500 jobs for this year.

If the report is to be believed, besides stopping the addition of new retail loans in India, Barclays will also sell off loans worth ₹32 billion ($0.6 billion), which is more than a third of its existing retail loan portfolio of ₹83 billion ($1.6 billion).

While the decision will have negligible impact on the bank’s outstanding loan volume or retail banking margins, we do have our doubts about the soundness of Barclays’ decision to exit its retail business in the country that holds the best growth prospects among all developing nations. Barclays’ larger presence in India compared to its biggest competitors could well have been a major strength for the bank in the long run.

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1. Barclays likely to exit retail business in India, Economic Times, Dec 7 2011 [↩]