FirstRand Bank, South Africa’s second-largest bank with USD118 billion in assets is the latest foreign bank to completely exit India ending almost 12 years of trying to build a local franchise in the country. FirstRand Bank confirming the shutdown of its only branch in Mumbai and a retreat into a limited representative office.
The move is likely to impact at least 50 jobs in India. The strategy of FirstRand has been taken in India to transform the current office into an official office. FirstRand will discuss this proposed change with the regulators. First Rand’s exit represents a second withdrawal of a foreign lender from India within one week of U.S. giant Citibank announcing plans in 13 markets, including India late last week to sell its consumer bank business.
FirstRand’s is not as big as the 120-year-old Citibank’s again sheds the spotlight on foreign lenders retreating to their home markets. In the late 2009 season, the South African lender began operations and only begun to lend to individual customers and SMEs in 2012.
The planned extension, adding new branches was the third bank to set up a wholly-owned subsidiary in India following Singapore’s DBS Bank Ltd and the State Bank of Mauritius (SBM), but the plans were never fulfilled by the country’s non-scale and rising NPAs.
“We have thought that by higher-ranking companies they could return to some, but did not take the small margin and tough competition into account. There was no meaning in this market for a 4 percent risk-adjusted return.
We have also lost money from loans to IL&FS, the last nail in the coffin, a falling infrastructure conglomerate”, said Wahi Rohit, Managing Director of FirstRand India. “The profit of FirstRand grew by Rs 5.37 crore from Rs 1.42 crore a year earlier in the year ended March 2020.
The provisions and contingencies of Rs 21 crore from Rs 6 crore, however, increased by more than three times showing stress in bank books. At the end of March 2019, the net NPAs of the Bank increased from almost nothing in March 2018 to 5.18 percent of loans”, he added.
Even when corporate and investment banking revenues stayed at Rs 46 crore, income depended on treasury revenue that increased Rs 115 crore in March 2020 from Rs 89 crore in March 2019. A meaningful domestic franchise in India has proved difficult to build. Since 2013, Wahi has been CEO and led the bank’s retail and SMU responsibilities, and later monitored the retreat.
The Indian company succeeded in supporting trade and investing in the Indo-Africa Corridor. This was key to FirstRand’s strategy to expand its offerings across the broader African continent but requires only a representative office to implement.
“The bank results of total book were at Rs 420 crore at the end of March 2020 up from Rs 405 crore a year ago. The bank had expected some recovery of loans, but it has not been able to get much from the IL&FS process”, said Wahi Rohit.
