Tue, Aug 15, 2006 - Page 11 News List

HSBC to expand in China

GROWING FAST The banking giant announced plans to increase its number of outlets to over 30 and take advantage of relaxation following China's WTO entry

BLOOMBERG

HSBC Holdings Plc said it plans to expand its number of outlets in China, the most of any overseas bank, by a quarter this year to support rising demand for financial services in the world's fastest-growing major economy.

The London-based lender will add at least six outlets on China, giving it more than 30 by the end of the year, Richard Yorke, chief executive officer of HSBC China, said in a press conference in Shanghai yesterday. The lender plans to almost double its workforce in the country by hiring 2,000 people this year and next to sustain growth.

"Network expansion is the key part of our organic growth strategy," Yorke said. "We should be focusing on four cities -- Shenzhen, Guangzhou, Shanghai and Beijing -- as our main retail banking markets."

Citigroup Inc, HSBC and other overseas banks are trying to tap US$1.9 trillion of household savings and loan growth averaging 14.5 percent in the past five years. China's GDP per capita grew an average of 14.4 percent over the past five years, Bank of China said in its share sale prospectus, spurring demand for financial services such as for credit cards, mortgages, trade finance and asset management.

HSBC's targets for expansion are all fairly prosperous.

Shanghai and Beijing are the nation's two wealthiest cities as measured by GDP per person. Shenzhen and Guangzhou are two major cities in Guangdong Province, an area of 110 million people with a high per capita income that lies across the border from Hong Kong.

Seeking investors

HSBC is also seeking to attract customers looking to invest money abroad. The lender last week received a US$500 million quota from the foreign-exchange regulator to convert yuan deposits into foreign currency for overseas investment under the nation's qualified domestic institutional program, or QDII.

HSBC is the first overseas bank to roll out QDII investment products. With a minimum investment of US$10,000, Chinese individuals may reap returns of as much as 18 percent upon maturity in 18 months by investing in the product, which is linked to the performance of a basket of currencies including the euro, South Korean won and Indian rupee.

Still, the lender won't be able to take yuan deposits from local residents until the end of this year. In December, the government removes all geographic restrictions on overseas banks that may currently operate in 25 Chinese cities.

"The impact of the WTO-mandated opening of the banking sector will be gradual and not cause an immediate system collapse," May Yam, vice president at Moody's Investors Service, said in China's banking industry outlook report issued last month. "Foreign banks are likely to target high-end retail and multinational corporations in the more affluent coastal regions."

Overseas lenders operated 233 outlets nationwide as of Sept. 31, compared with more than 70,000 owned by their Chinese rivals.

Assets of foreign banks in China reached a total of 550.7 billion yuan (US$69 billion) last September, making up about 2 percent of the total at China's financial institutions.

HSBC, founded in Hong Kong and Shanghai in 1865, owns stakes in two Chinese lenders, an insurance company and a fund management venture after investing about US$5 billion in China's financial industry.

Acquisition

The lender paid US$1.75 billion for its 19.9 percent stake in Bank of Communications Ltd (交通銀行) in August 2004, marking its biggest acquisition in China. The stake is the maximum allowed a single overseas investor under Chinese regulations. Last September, HSBC completed the purchase of a 9.9 percent stake in Ping An Insurance (Group) Co (平安保險) for US$1.04 billion, doubling its stake in China's second-largest insurer.

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