HSBC To Buy L&T Investment, Boosts Wealth Franchise In Asia

HSBC Holdings plc is a British multinational investment bank and financial services holding company. It is the second largest bank in Europe behind BNP Paribas, with total equity of US$204.995 billion and assets of US$2.984 trillion as of December 2020. HSBC traces its origin to a hong in British Hong Kong, and its present form was established in London by the Hongkong and Shanghai Banking Corporation to act as a new group holding company in 1991; its name derives from that company's initials. The Hongkong and Shanghai Banking Corporation opened branches in Shanghai in 1865 and was first formally incorporated in 1866.

As part of the HSBC efforts to expand its wealth management business in Asia,HSBC Holdings plcs (HSBC - Free Report) indirect wholly-owned subsidiary, HSBC Asset Management (India) Private Ltd, has agreed to acquire L&T Investment Management Limited (LTIM) for $425 million. The purchase deal comes four months after HSBC inked a deal to buy AXA Insurance in Singapore for $575 million. LTIM is a wholly-owned subsidiary of L&T Finance Holdings Limited (LTFH) and the investment manager of the L&T Mutual Fund. LTIM facilitates a distribution platform, comprising leading banks, regional distributors, more than 50,000 independent financial advisers, ascertained digital platforms, and a footprint covering 65 locations throughout India.

L&T Mutual Fund is a mutual fund company in India. It caters to the investment needs of investors through various mutual fund schemes. The company claims to have sound investment management practices and a knowledgeable fund management team. L&T Financial Services is India's leading NBFC which offers various investment management services like SIP, ELSS, tax saving mutual funds & more.

Finalizing of the deal is subject to regulatory approvals and customary condition precedents, following which HSBC intends to integrate the operations of LTIM and its current asset management business in India, having an asset under management balance of $1.6 billion as of September 2021. The transaction will likely be funded using existing resources. It is expected to have a minimal impact on HSBC‘s common equity tier 1 ratio, while being immediately accretive to the bank’s earnings following completion.

A return on investment of greater than 10% in the medium-term is expected by HSBC. LTFH will be end to excess cash in LTIM until the completion of the deal apart from the purchase consideration of $425 million. In the meantime, both LTIM and HSBC will warrant continuity of services to their investors and counterparties.

HSBC CEO Noel Quinn, made a statement the acquisition refines its business competencies in India by enhancing its scale, expanding reach, and capturing 15-20% annual asset management market growth that is expected in India over the next five years. The transaction helps HSBC inch closer to becoming a pioneering wealth manager in Asia. He further stated, “Together with our recent announcement to acquire AXA Singapore, this demonstrates our commitment to capturing the Asia wealth opportunity. They will continue to invest significantly to achieve that goal.”