UBS bites the dust in India

Just like all the other big banks.

"Another one bites the dust". UBS is the latest in line of big western banks to be exiting the Indian wealth management industry. UBS will also be winding down its foreign exchange business in India as part of its global strategy to conserve capital.

A UBS spokesperson told Private Banker International that, over a span of two years, the Swiss banking giant will shut its single branch in Mumbai and "concentrate on its core businesses" rather than on capital intensive businesses, even though it is keeping its corporate client service division (including M&A, equities and debt capital market services) intact in the country.

Quite recently, Morgan Stanley surrendered its wealth management unit in India by selling it to Standard Chartered. Previously, Goldman Sachs also exited India’s wealth management arena. 

What makes India such a difficult market to survive in for foreign players?

Like most countries across the globe – now more than ever – regulation is a key concern, one that is amplified when it comes to India. With high entry barriers and a wing-clipped approach to the product universe, the Reserve Bank of India only keeps tightening controls.

This year, in the annual monetary policy statement on May 3, the RBI proposed a new banking structure involving differentiated licencing regime for domestic and foreign banks instead of granting a universal banking licence.

Beyond regulation, however, a bigger factor may be the fact that nuances around how the wealth management business, particularly, works in India is actually quite local.

A market like India has a number of things going for it. According to the World Wealth Report 2013, released by Capgemini and RBC Wealth Management, India experienced 22.2 per cent growth in its HNIs population, second only to Hong Kong in the Asia Pacific region.

But the key to understanding and thriving in a market like India is to have a deep rooted view of the local sentiment and clients’ trust that local banks have.

Indian family offices have a bigger trump card having handled key rich families’ wealth over generations, but the trust factor that local private sector banks such as ICICI, HDFC, Axis Bank, Kotak Mahindra Bank, to name a few, have achieved is tough to compete with. And they are catching up with global best practices fast.

Another factor that gives local banks an edge, perhaps, is the fact that India is a completely onshore market, everything being rupee denominated, and the investment products on offer are still relatively basic, unlike Western mature markets.

When I spoke to Atul Singh, managing director and head of global wealth and investment management for Merrill Lynch in India, back in 2011 for a feature, he told me that foreign banks such as Merrill Lynch, Barclays, JP Morgan, Citibank, and Credit Suisse, being experienced players globally, have taken the lead in developing innovative products targeting the HNWI and UHNWI. But the challenge in India, as an industry, is "how to make money from assets" due to the product universe still being fairly vanilla.

It’s not just India that is difficult to deal with, though. Russia is even more notorious for western bank exits, with Barclays and HSBC quitting retail and commercial banking operations in the region over the last couple of years. Reason? Local banks’ dominance, with most of the market share taken by Russia’s largest lender by assets, Sberbank, followed by VTB.

French bank Societe Generale’s Russian subsidiary, Rosbank, has been in the limelight for the wrong reasons recently with its CEO, Vladimir Golubkov, being fired and acquitted on bribery charges. But SocGen, being one of the few foreign banks still holding its ground in the statedominated banking sector, has shown optimism with its chief executive, Frederic Oudea, saying the lender aims to deliver a "sustainable return on equity of over 15 per cent" in Russia by 2015. Let’s see.

As for India, it will be interesting to note how local banks up their ante with another Western lender exiting, mould themselves to further regulatory changes, and how the other remaining foreign banks make space for themselves and the global approach they offer. "Pressure on people - people on streets". Queen really has said it all.

Photograph: Getty Images

Meghna Mukerjee is a reporter at Retail Banker International

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Donald Trump vs Barack Obama: How the inauguration speeches compared

We compared the two presidents on trade, foreign affairs and climate change – so you (really, really) don't have to.

After watching Donald Trump's inaugural address, what better way to get rid of the last few dregs of hope than by comparing what he said with Barack Obama's address from 2009? 

Both thanked the previous President, with Trump calling the Obamas "magnificent", and pledged to reform Washington, but the comparison ended there. 

Here is what each of them said: 

On American jobs

Obama:

The state of our economy calls for action, bold and swift.  And we will act, not only to create new jobs, but to lay a new foundation for growth.  We will build the roads and bridges, the electric grids and digital lines that feed our commerce and bind us together.  We'll restore science to its rightful place, and wield technology's wonders to raise health care's quality and lower its cost.  We will harness the sun and the winds and the soil to fuel our cars and run our factories.  And we will transform our schools and colleges and universities to meet the demands of a new age.

Trump:

For many decades we've enriched foreign industry at the expense of American industry, subsidized the armies of other countries while allowing for the very sad depletion of our military.

One by one, the factories shuttered and left our shores with not even a thought about the millions and millions of American workers that were left behind.

Obama had a plan for growth. Trump just blames the rest of the world...

On global warming

Obama:

With old friends and former foes, we'll work tirelessly to lessen the nuclear threat, and roll back the specter of a warming planet.

Trump:

On the Middle East:

Obama:

To the Muslim world, we seek a new way forward, based on mutual interest and mutual respect. To those leaders around the globe who seek to sow conflict, or blame their society's ills on the West, know that your people will judge you on what you can build, not what you destroy. 

Trump:

We will re-enforce old alliances and form new ones and unite the civilized world against radical Islamic terrorism, which we will eradicate completely from the face of the earth.

On “greatness”

Obama:

In reaffirming the greatness of our nation we understand that greatness is never a given. It must be earned.

Trump:

America will start winning again, winning like never before.

 

On trade

Obama:

This is the journey we continue today.  We remain the most prosperous, powerful nation on Earth.  Our workers are no less productive than when this crisis began.  Our minds are no less inventive, our goods and services no less needed than they were last week, or last month, or last year.  Our capacity remains undiminished.  

Trump:

We must protect our borders from the ravages of other countries making our product, stealing our companies and destroying our jobs.

Protection will lead to great prosperity and strength. I will fight for you with every breath in my body, and I will never ever let you down.

Stephanie Boland is digital assistant at the New Statesman. She tweets at @stephanieboland