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Societe Generale: local knowledge key to success in India

5th December 2005

Expanding on its existing non-resident Indian offering, Societe Generale's SG Private Banking arm is pushing further into a market with significant growth opportunities. As the new operation finds its feet in the market, SG's potential acquisition of a local player should help the operation challenge the domestic competition for the numerous wealthy clients.

SG Private Banking has expanded its reach in India with the launch of a new onshore wealth management operation based in New Delhi and Mumbai. The high net worth (HNW) populations of Bangalore and Chennai will also be targeted.

The formation of the new business marks the second major step in the wealth manager's expansion strategy in India, after establishing a wealthy non-resident Indian (NRIs) offering in 2004. After this latest move, SG Private Banking employs a total of 40 private bankers serving wealthy Indians in their home market or around the world through the NRI proposition.

In addition, the wealth manager has announced plans to acquire a stake in an Indian bank before 2009 as the financial services sector is opened up to foreign players. Currently, foreign firms can only operate via three channels: opening branches; a wholly-owned subsidiary; or a subsidiary with an aggregate foreign investment of up to 74% in an Indian private sector bank. The wealth manager has already been involved in discussions with the Reserve Bank of India regarding acquisition possibilities.

According to Daniel Truchi, CEO of SG Private Banking in the Asia Pacific region, India is a significant market for the private banking business in Asia, with the wealth manager predicting double digit growth rates.

Mr Truchi is indeed right to see the Indian market as a key target given its size and growth potential. According to Datamonitor estimates, there were around 620,000 mass affluent and HNW individuals at the end of 2003, and these populations are set to increase at a compound annual rate of 9.9% and 11.0% respectively by 2008.

However, the immaturity of the wealth market in India and a relative lack of financial sophistication among Indian investors means that domestic competitors have a hold over a significant number of HNWs. With this in mind, a local acquisition is a very sensible option.

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