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Morgan Stanley said to shut private bank

Thursday, 8 November 2012 - 8:06am IST | Place: Mumbai | Agency: DNA
After trying for 48 months, Morgan Stanley seems to have concluded that managing India’s moneybags is not worth its while – three months after rival Bank of America threw its hands up.

After trying for 48 months, Morgan Stanley seems to have concluded that managing India’s moneybags is not worth its while – three months after rival Bank of America threw its hands up.

The global bank is looking to sell its private wealth management business in India, Reuters said on Wednesday, citing sources it didn’t identify.

The move will not affect its other businesses in India, such as equity broking.
Headquartered in Mumbai, Morgan Stanley’s Indian private wealth management unit has offices in New Delhi, Kolkata, Bengaluru and Chennai, according to its website.
A spokesperson for Morgan Stanley declined to comment.

Bank of America sold its private banking unit in India in August to Julius Baer, a Swiss private banking group as part a global transfer outside of America.

Societe Generale, France-based banking major too had earlier severely pruned down its Indian operations during middle of 2011.

SG Private banking, however, continues to serve high net-worth, non-resident Indians and people of Indian origin through its office in China, Japan and Singapore.

A few more European major banks too have undertaken cuts in headcount in private wealth business over last one year.

Industry experts believe that high cost structure, low level of customisation, tough business environment in last few years and increasing regulatory compliance requirements apart from constrained balance sheets due to problems back home, may be prompting the global majors to relook at the private wealth management business.

The CEO and head of wealth management at a domestic financial services firm said there were three reasons why foreign peers find it difficult: high regulation requirements back home, high-cost business model and lack of local decision-making.

Then there is the poor market condition over the last three years, forcing people to look beyond financial assets.

A Credit Suisse global wealth report released last month said total household wealth (net worth) in India declined 18% between mid-2011 to mid-2012 to $3,193 billion with percentage decline in financial assets quite prominent.

Rajesh Kothari, managing director at Alfa Accurate Advisors, a boutique firm offering investment advisory to wealthy individuals agreed the last three years have been tough.

“Also, many global houses are realigning strategies due to problems back home. The constrained balance sheet has been an issue and with Indian business not growing as they had expected and with the overhang of high infrastructure cost and growing regulatory tightening, some of the foreign houses in asset management have decided to exit,” he said.

Kothari believes that many of the private wealth players do not offer tailor made products and lack customisation which may lead to domestic boutique firms gaining advantage.

Credit Suisse global wealth reports predicts 53% rise in number of dollar millionaires in India from 1.58 lakh to 2.42 lakh over next five years.
 




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