India profits for small foreign banks plunge

Foreign banks with limited branch presence in the country have witnessed a sharp decline in their earnings. Revenues have plunged, costs widened and credit quality deteriorated amid an uncertain macro-economic environment.

British lender Barclays' India business suffered a loss of Rs 183 crore (Rs 1.83 billion) in 2011-12, as it earned lower revenues from treasury and retail banking businesses. It had made a net profit of Rs 100 crore (Rs 1 billion) in the previous financial year.

Barclays has nine bank branches in India and is exploring opportunities to sell its retail banking business here. The losses in commercial banking were Rs 60 crore (Rs 600 million) and in retail banking it was Rs 131 crore (Rs 1.31 billion).

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American Express Banking Corporation, present in the four metropolitan cities through its offices, saw its India net profit declining to Rs 4 crore (Rs 40 million) in 2011-12 from Rs 26 crore (Rs 260 million) a year earlier, due to rise in expenses.

It had sold its banking unit to Standard Chartered Bank in 2007. In India, it is in the business of credit cards, including prepaid cards. It also distributes traveller cheques and accepts institutional deposits.

"The impact on earnings is due to higher operating expenses, primarily due to investments in technology and human resources for launch of new products like prepaid cards and expansion of current products and services. The higher funding costs for our expanding business and hardening of interest rates caused our interest costs to increase year-on-year," their India spokesperson told Business Standard.

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The lender's interest expense more than doubled, while its operating expenses increased by 16 per cent during the financial year.

"American Express is committed to India and will continue to invest in this high growth market, to scale up market share and expand our range of products and services...The India growth has been of high quality, with our total income increasing 27 per cent and gross non-performing assets declining to 1.58 per cent," the official added.

BNP Paribas India also witnessed a sharp erosion in earnings, with its net profit plunging by 57 per cent to Rs 81 crore (Rs 810 million).

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