Morgan Stanley may be selling its private wealth management business in India, confirming the trend of foreign banks pruning down on operations in the country and the region.
In August, Bank of America sold its private banking unit in India to Swiss private banking group Julius Baer, as part of a global transfer outside of America. Société Générale had also severely cut down its Indian operations mid last year.
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Morgan Stanley’s other businesses in the country are expected to remain unaffected by the move, DNA India reported. The bank currently has offices in Mumbai, Chennai, New Delhi, Kolkata and Bengaluru.
Industry experts believe poor market conditions over the past three years – in addition to other factors such as high operating costs and increasing regulatory requirements back home – may be prompting global majors to review their private wealth management business.
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By GlobalDataMany global houses are realigning strategies due to problems back home, Rajesh Kothari, managing director at Alfa Accurate Advisors, observed.
"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 added domestic boutique firms may gain advantage in the longer term since many private wealth players do not offer tailor-made products and lack customisation.
18% year-on-year decline in Indian household wealth
While a few other European major banks have also undertaken cuts in headcount in their private wealth business in the country over the past year, Asian banks such as Alfa Accurate Advisors continues to serve high net-worth, non-resident Indians and people of Indian origin through its office in China, Japan and Singapore.
HSBC India, which recently announced plans to trim its workforce by 22,000, has also ruled out job cuts in the country due to its profitable and strategic market position.
A Credit Suisse global wealth report released last month revealed an 18% ($3,193bn) year-on-year decline in India’s total household wealth as at mid-2012, it also predicted a 53% rise in number of dollar millionaires in India from 158,000 to 242,000 over the next five years.
