HSBC's Restructuring in India
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Case Code: BSTR148 Case Length: 12 Pages Period: 1999-2004 Pub Date: 2005 Teaching Note: Not Available |
Price: Rs.300 Organization: HSBC India Industry: Banking Countries: India Themes: - |
Abstract Case Intro 1 Case Intro 2 Excerpts
Excerpts
HSBC in India
HSBC's origins in India could be traced back to October 1853, when the Mercantile Bank of India, London and China was established in Mumbai. Starting with an authorized capital of Rs 5 mn, the Mercantile Bank soon opened offices in London, Chennai (India), Colombo, Kandy, Kolkata (India), Singapore, Hong Kong, Canton and Shanghai. In the next 10 decades, the Mercantile Bank steadily expanded its geographical network and service offerings, keeping pace with the evolving banking and financial needs of customers. The Mercantile Bank was acquired by the HSBC Group in 1959. The head office of Mercantile Bank at the Flora Fountain building in Mumbai continued to be the head office of the HSBC Group in India. In the 1970s, HSBC decided to expand by acquisition and formation of its own subsidiaries. HSBC introduced India's first automated teller machine (ATM) in 1987. In 2001, HSBC opened the first bank branch in Pune (Western India) that remained open all 365 days a year...
The Restructuring
On his appointment, Booker's approach was to focus on fine-tuning and executing existing strategies, rather than experimenting with new plans. He intended to take it slow and steady without radical changes. He said that "the people issue" was very important to him. Therefore, the key components of the restructuring programme included introducing new work principles, downsizing, organizational reshuffling and focus on new growth areas.
HSBC's work culture was considered most bureaucratic among all foreign banks in India. Reportedly, the top management had a laid-back attitude towards work. An insider said, "There is a bunch of people at the top who aren't very competent and who all play golf together. It is basically an old boys'club..."
The Benefits
The impact of the restructuring programme was reflected by the improved financial performance of HSBC (Refer Exhibit IV and V for the financial highlights of HSBC). For the financial year 2003-04, the assets per employee and net profit increased by 30 per cent; operating profit by 31 per cent and cost-to-income ratio came down from 47 to 43 per cent compared to the fiscal 2002-03. Personal financial services accounted for 36 per cent of total advances, against 31 per cent in the previous fiscal. HSBC's retail assets doubled during this period from around a fourth to a third of its total assets. HSBC expected that the retail business would grow by 40 per cent in the fiscal 2004-05. Home loans business grew by 100 per cent; and the branches' contribution comprised 30 per cent...
Looking Ahead
Notwithstanding the benefits reaped from the restructuring, HSBC was still a small player in several financial services businesses including asset management, home loans, stock broking, credit cards and retail banking in India. For instance, HSBC Asset Management (India) Private Ltd. launched in December 2002, had total assets under management amounting to Rs 540 bn by June 2004. Still, it was only the 10th largest asset management company (AMC) in India. The slow growth of advances was another problem for HSBC. In the financial year 2003-04, HSBC's loan disbursals grew by just 4.67 per cent over the financial year 2003 while for the same period, its competitors like Standard Chartered and Citibank loan disbursals grew by 44 per cent and 11 per cent respectively. Moreover, in spite of improved financial performance, the changes introduced by Booker did not go well among top managers...
Exhibits
Exhibit I: Top Ten Banks in the World (July 2004)
Exhibit II: HSBC Group's Subsidiaries
Exhibit III: Hsbc Group Companies in India
Exhibit IV: HSBC India - Financial Highlights (2003-04)
Exhibit V: Financial Performance of HSBC India
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