Deutsche Bank AG, Europe’s largest lender with $3.07 trillion (Rs.153 trillion today) of assets, has infused Rs.455 crore to strengthen its Indian operations. The German bank has been investing money every year in its Indian branches since 2007, with 2009 being an exception.
“The capital base pertains only to the India branches and excludes all other Deutsche Bank entities operating in India—equity broking and investment banking, primary dealership, asset management and shared services,” Deutsche Bank said in an emailed statement on Tuesday.
The latest capital infusion will take the bank’s tier I or core capital in the country to a little over Rs.5,500 crore. Tier I capital includes a bank’s equity and reserves.
Deutsche Bank’s India branches have shown a compound annual growth rate of 38% over the last five years. The German bank recently received nod from the Reserve Bank of India (RBI) to open two branches in Ahmedabad and Surat, which will take its network to 17 outlets.
The additional capital will be used to service and finance the bank’s corporate, institutional and retail clients, said Gunit Chadha, chief executive of Deutsche Bank’s Indian unit.
Corporate and investment banking makes up more than 80% of Deutsche Bank’s business in India. In April 2011, the bank sold its credit card business to IndusInd Bank Ltd, but has maintained that it will continue to invest in retail banking, although this will remain a small part of its overall business in India.
In 2010-11, Deutsche Bank’s profit in India rose 41% to Rs.630 crore, helped by rising income from advances, trading and fees. It earned Rs.1,880.16 crore from advances and investments, up from Rs.1,578.87 crore in the previous year.
This is the right time for foreign banks to strengthen their Indian businesses to service corporate clients in the country, said Manish Ostwal, banking analyst at Kisan Ratilal Choksey Shares and Securities Pvt. Ltd.
“Even larger banks such as Standard Chartered are now focusing on wholesale banking because getting permission to open branches from RBI is difficult, while helping Indian companies to get capital from abroad is their strength, which no other local bank except the State Bank of India can provide,” Ostwal said.
Deutsche Bank’s new branch licences from RBI have come after two years. UK-based Standard Chartered Plc received permission to open three branches—one each in Jaipur, Jodhpur and Thiruvananthapuram in 2010. The last time both the banks opened branches was in 2010.
In India, Deutsche Bank is the smallest of the big foreign banks in the country, including Standard Chartered, Citibank NA and the Hongkong and Shanghai Banking Corp. Ltd (HSBC). RBI distributes 12-18 branches among all foreign banks every year. SBI Recruitment 2012
HSBC and Citibank have not got permission to open any new branch in the current cycle, their spokespersons said.
India’s reputation as one of the fastest growing economies in the world has also led to lenders such as Deutsche Bank in getting capital here, Ostwal said.
“The recent ratings downgrade of the Indian banking sector has made it difficult for Indian banks to access funds and, hence, foreign banks have an opportunity to strengthen their position in areas such as foreign exchange, commodities, merger and acquisitions and structured finance,” the analyst said.
In November, global rating agency Moody’s Investors Service Inc. downgraded the outlook for Indian banks to negative from stable, citing a likely deterioration in asset quality in the next 18 months.
