23rd Dec 2021 22:01
(Alliance News) - HSBC Holdings PLC said Thursday it plans to buy the the investment management unit of India's L&T Finance Holdings Ltd for USD425 million.
The deal fits into the lender's push to build up its Asian wealth and investment business that is at the forefront of its turnaround plans.
"The proposed acquisition, subject to regulatory approval, will be another milestone as HSBC delivers on its strategy of becoming a leading wealth manager in Asia," the bank said.
"Strengthening HSBC's asset management business in India will add to its ability to serve the wealth needs of its customers in India as well as those of its growing non-resident Indian customer base across the world."
L&T's investment management unit held assets under management of about USD10.8 billion at the end of September, marking it the twelfth largest mutual fund management company in India.
LTIM reported a pretax profit of USD25.0 million on income of USD46.9 million in the financial year ended March 2021.
If the deal gets the greenlight, HSBC will merge the operations of LTIM with its existing asset management business in India, which had AuM of USD1.6 billion at September 30.
HSBC Chief Executive Noel Quinn said: "This transaction enhances the strength of our business in India and reinforces our status as one of Asia's leading wealth managers. Combining LTIM with our existing Indian asset management business gives us the scale, reach and capabilities to capture some of the 15% to 20% annual asset management market growth expected in India over the next five years. It also boosts our ability to serve India's growing wealth needs, along with those of the 18 million non-resident Indians around the world.
"Together with our recent announcement to acquire AXA Singapore, this demonstrates our commitment to capturing the Asia wealth opportunity. We will continue to invest significantly to achieve that goal."
HSBC agreed to buy AXA SA's insurance business in Singapore in a USD575 million cash deal in mid-August. AXA Singapore is the eighth biggest life insurer in the city-state by annualised new premiums.
The LTIM deal, HSBC noted, will be funded from existing resources and will have a "minimal" impact on its CET 1 ratio.
HSBC expects the acquisition to be immediately accretive to earnings and achieve a return on investment of greater than 10% in the medium term.
In February 2020, HSBC combined its retail banking and wealth management, asset management, insurance and private banking businesses to create a Wealth & Personal Banking unit as part of its turnaournd. In those plans, HSBC set out a goal "to be Asia's leading wealth manager by 2025".
Asia generates nearly 65% of HSBC's wealth revenues.
By Paul McGowan; [email protected]
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