HSBC Holdings PLC, the world's fourth-largest bank by market value, may add 50 branches in four years in Japan to offer more banking to the wealthy, the Financial Times reported.
The expansion would cost hundreds of millions of dollars, the newspaper said, citing sources that it didn't identify. HSBC currently has two branches in the country, one in Tokyo and the other in Osaka, which do corporate and private banking.
"We intend to focus on the mass-affluent market and plan to expand our distribution network," said David Hall, a Hong Kong-based spokesman for HSBC, declining to comment specifically on details in the report. HSBC is looking at entering consumer banking, he said.
HSBC, which opened its first Japanese branch in Yokohama in 1866, is seeking a greater share of the US$13 trillion of financial assets held by Japanese individuals in an economy in its longest period of postwar expansion. Japan grew an annualized 5.5 percent in the fourth quarter, the fastest pace in three years.
"Japan may not be growing fast, but its people are very wealthy," said Albert Cheng, an analyst at Quam Ltd in Hong Kong.
HSBC, one of the first banks to open an office in Japan, will offer wealth management products targeting higher-income customers, using the Internet to overcome its small branch network, said Michael Smith, chief executive officer of the bank's Asian operations, in an interview last October.
The bank, which began private banking private services in Japan in 1996, caters to individuals with financial assets over ?300 million (US$2.5 million). The nation's households have 51 percent of their assets in cash or deposits, compared to 16 percent in the US and 26 percent in the UK, according to HSBC documents released this month.
Profit before tax in Japan was US$123 million last year, compared to US$708 million in China and US$5.2 billion in Hong Kong.
Foreign banks face challenges in the country as they lack large networks to attract customers and Japan is considered to have too many banks for its population. Japan Post, the country's postal system and the world's largest savings bank, alone has more than 24,000 branches.
New York-based Citigroup Inc, the biggest US bank, had ?5.8 trillion of assets in Japan at the end of last March. The bank launched a US$13.4 billion takeover bid for Japan's third-largest brokerage, Nikko Cordial Corp, earlier this month.
Japan's largest banks have struggled to boost revenue as the lowest interest rates among developed economies and competition in the corporate lending market prevented an improvement in loan margins. Mitsubishi UFJ Financial Group Inc, Japan's biggest bank, posted a 42 percent decline in net income in the last quarter of last year.
The Bank of Japan raised its overnight lending rate to 0.5 percent from 0.25 last month, and bank lending rose in February last year for the first time in the last 10 years.
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