JPMorgan (JPM) Goes Against The Herd To Expand In India

While most foreign banks are contracting their operations in India due to regulatory concerns, JPMorgan Chase & Co. (NYSE:JPM) is all set to open three more branches in the country. It has already won the Reserve Bank of India’s approval for this expansion.

The branches – one each in New Delhi, Bengaluru and Chennai – are expected to be operational in the next few months.

All of JPMorgan’s existing products and services, including cash management, trade finance, foreign-currency payments and lending services, are expected to be available in the new branches.

Rationale Behind the Expansion

Chennai’s position as a manufacturing hub, Bengaluru as an information technology center and New Delhi being the national capital, will help the company to provide better services to its current clients, including multinational companies and Indian firms, that have worldwide trade links.

Further, as Kalpana Morparia, CEO, South and South-East Asia, JPMorgan, stated, "This is another significant milestone for growing our Indian franchise and deepening our banking footprint. The expansion endorses our long-term commitment to India, a key market for J.P. Morgan, as well as for many of our clients".

Strategy to Benefit JPMorgan

This strategy is in stark contrast to those being followed by the other leading foreign banks operating in India. In the past few years, most foreign banks have withdrawn a range of services from the country because of the restrictions imposed on them. The regulations in the country allowed the foreign banks to open only a limited number of branches and allocate part of their lending to the priority sector.

Consequently, earlier this year, HSBC Holdings (LON:HSBA) Plc (NYSE:HSBC) planned to close almost half of its branches in India and rely more on digital banking to expand its consumer base in the nation. Also, Barclays (LON:BARC) Plc (NYSE:BCS) announced that it would be closing down India’s equity business to cut costs and improve profits.

However, in spite of going against the fellow banks and not scaling back its operations in India, JPMorgan did not feel any significant impact on its profit margins. Rather, the new initiative should lead to better business for the bank in the absence of competition from other foreign banks.

Share price of JPMorgan increased, following the announcement of the Reserve Bank of India’s approval for the expansion, indicating investors’ optimism about this step.

Currently, JPMorgan has a Zacks Rank #3 (Hold).

A better-ranked stock in the finance sector is Bank of Montreal (TO:BMO) , sporting Zacks Rank #1 (Strong Buy).



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