HSBC bets on Internet banking to drive growth

London-based Banking giant HSBC Ltd plans to double investment in Internet banking this year to drive expansion in Taiwan, while its rivals turn to mergers and acquisitions to increase their market share.

"We are happy with our organic growth [via Internet banking] now," Paul Leech, president and chief executive officer at HSBC Taiwan, told a media gathering yesterday.

Leech said HSBC hoped to open more branches in Taipei, but had shelved takeover plans because local banks were too expensive.

The company is not considering strategic partnerships with local banks via equity investment, because it would benefit a counterpart more than HSBC, Leech said.

Market watchers have suggested HSBC could be in acquisition talks with several small-sized local lenders, including Far Eastern International Bank (遠東國際商銀).

Citibank was reportedly about to conclude a takeover deal with the Bank of Overseas Chinese (華僑銀行), which would have entailed acquiring 55 branches. The reports followed on the heels of Standard Chartered Bank's buyout of Hsinchu International Bank (新竹國際商銀), which brought the number of its branches to 86, making it the biggest foreign bank.

To attract customers and communities through the Internet, HSBC introduced its Internet banking services, dubbed HSBC Direct, last September.

The bank plans to double investment in HSBC Direct to NT$1 billion (US$30 million) this year from NT$525 million last year, Leech said.

The lender hopes to see its number of accounts more than double this year from around 25,000 accounts as of the end of last year, said Sanjiv Sud, head of HSBC Taiwan's personal financial services.

During the consumer credit abuse storm that impacted negatively on the banking industry, HSBC Taiwan incurred a net loss of NT$1.12 billion on rising provisional costs of NT$7.8 billion to cover bad debts last year, compared with net profits of NT$2 billion in 2005.

"We hope to return to profitability with much lower reserves expense this year as the consumer bad loans issue subsides," Sud said.

Yet, the personal Bankrupcy Law (破產法) -- currently in the draft stage -- could exempt debtors from part of their obligations and is a looming concern that could cause unwanted change to the banking industry's outlook, he said.

Meanwhile, HSBC Taiwan will undergo a management reshuffle that will see Leech relocated to Hong Kong in June to look after regional management. He will be replaced by Alistair Currie, HSBC's head of trade services for the Asia-Pacific region.