Kotak Mahindra Bank Acquires Barclays’ Loan Portfolio

Kotak Mahindra Bank (KMBL), yesterday, acquired the business loan portfolio of Barclays Bank India and Barclays Investment and Loan India. However, the deal size is still undisclosed. This acquisition would help the KMBL to have an additional access to nearly 6000 customers and Barclays’ outstanding loan book of about Rs 700 crore.

The move was in line with the bank’s strategy, which would add value to its existing business and further strengthen its business loan portfolio. The bank made an announcement on the Bombay Stock Exchange (BSE) yesterday post market and therefore the impact of the news is visible in the stock today, which has moved higher by 1.5% to Rs 688.5 per share.

According to media reports, Barclays had wished to come out from the loan portfolio in India since December 2011. And many of the banking players including KMBL were looking on the same for more than a year, which finally went through yesterday. Further, according to reports, Barclays has trimmed its Indian operations in the past with its retail business closing down in 2011. It is majorly focusing its business on multinational and large companies and is also looking at its wealth management and Investment banking businesses. 

One should broadly recollect that KMBL, in the past, had acquired Barclays’ bank credit card portfolio for around Rs 250 to Rs 300 crore, which had cards and customers of approximately around 2 lakh. The credit card acquisition made by KMBL in the past was the non-performing portfolio and hence for an instance, market participants thought that the loan portfolio would also be stressed. However, this is not true and the loan portfolio is healthy in nature. According to the announcement by KMBL, all the acquired loans are classified as “Standard Loan” as per the current Reserve Bank of India's (RBI) guidelines. 

On a standalone basis, KMBL Loan book, as on December 31, 2012 stands at Rs 50,245 crore. And therefore the acquisition of Rs 700 crore of Barclays’ business is meagre 1.4% of its total loan book.

We believe that the acquisition of this small loan book would not have much impact on the bank’s financials. However, one has to still watch out whether the bank has acquired these loans on higher valuations or not. Nevertheless, we would be updating investors on the same, and would hence suggest you to keep visiting our website.