HSBC India profit up 9% led by corporate loan growth

Profit before tax from its commercial banking division increased to $265 million from $187 million in 2020 likely due to growth in loans to small and medium enteprises (SMEs) and made up for stagnant profit from the bank’s global banking and markets (GBM) which is the largest revenue centre for the bank in India.

GBM profit before tax remained unchanged at $593 million but still contributed more than half of the bank’s profit in India. HSBC’s GBM division services large corporations and also includes treasury income for the bank.

“HSBC India has consistently been amongst the top five contributors to the group’s profits. The wholesale business has performed extremely well across liabilities, assets, transaction banking and capital markets. While we’ve grown across the board, certain segments like business banking and international subsidiary banking have stood out and continue to outpace the market. India is a key growth market for HSBC globally and we’re keen to expand our international wholesale and wealth businesses,” India CEO Hitendra Dave said.

India is the fourth largest contributor to the bank’s global profit behind Hong Kong, UK and China.

The growth in the commercial banking business is on the back of a sustained focus by the bank in that segment in the last five years.

In an interview with ET in August 2021, Rajat Verma, head commercial banking, HSBC said the bank’s corporate loan book in India has grown at a compounded rate of 16% in the last five years led by a tripling in loans to SMEs to $1 billion in June 2021 from $300 million in 2018 as Verma has expanded the bank’s presence around the bank’s 26 branches in India.

Verma said he the bank is open to expanding its book even though many foreign bank peers have limited their operations in India.

Last month the bank announced that it will acquire L&T Mutual Fund in India for $425 million subject to regulatory approvals as part of its global strategy to expand its wealth management capabilities in the country.

“We accelerated the development of our wealth capabilities across the rest of Asia by several years through two acquisitions. We entered into an agreement to buy AXA Singapore, which was completed earlier this month and will expand our insurance and wealth franchise in our ASEAN regional hub. We also agreed to buy L&T Investment Management to strengthen our asset management business in India. Both deals represent significant steps towards our ambition of being a leading wealth manager in Asia,” group CEO Noel Quinn, said in its post results comments.

HSBC also plans to increase its stake in Canara HSBC Oriental Bank of Commerce Life Insurance Co Ltd to 49% from 26%, subject other shareholder and regulatory approvals as part of its wealth management outreach.

Profit before tax from the bank’s wealth and personal banking (WPB) division increased 25% to $20 million in 2021 from $16 million in 2020.

While profit before tax from the bank’s corporate centre division, which provides support services to the bank globally increased 2% to $232 million in 2021 from $228 million a year ago.