HSBC Bank Taiwan is taking advantage of the government’s efforts to build an offshore yuan trading hub by deepening its private and investment banking as well as asset management and securities businesses, company president and chief executive officer John Li (李鐘培) said yesterday.
To that end, the lender aims to expand its customer base, which is currently concentrated on the manufacturing industry, to service providers in the creative, educational, biotechnological, medical and hypermarket sectors, Li said.
“We’re upbeat about the yuan undertaking, given the fast accumulation of yuan deposits” that may reach 200 billion yuan (US$32 billion) at the end of this year and hit 600 billion yuan late next year, Li said.
The British banking group, which specializes in transactional and commercial banking, intends to seize a significant market share in yuan-linked business, particularly in trade settlements, Li said, without giving target numbers.
At present, only 12 percent of China’s cross-border trade is settled in yuan, Li said, adding that the figure may rise to 30 percent in 2015, making yuan the world’s third-largest settlement currency, as companies seek to cut foreign exchange costs.
Financial institutions must also find matching assets for yuan deposits to turn a profit and meet customers’ needs, Li said.
“The key to success lies in whether the market can offer lower funding costs and higher yields,” he said.
The outlook of Formosa bonds, as promoted by Taiwan’s Financial Supervisory Commission (FSC), is favorable because Taiwan’s low borrowing costs are attractive to foreign issuers, Li said.
However, the regulator has to ease rules on ratings requirements and raise exposure limits to China in order to realize the attraction, Li said.
Only 50 percent of issuers in Hong Kong retain ratings services that many medium-sized firms deem a heavy financial burden, Li said.
Life insurance companies — major bond purchasers in the local market — may not buy Formosa bonds, unless the regulator exempts yuan-based bonds from their exposure to China, Li said.
Taiwan is well-positioned to provide customers with better cash management, given its importance in Greater China, HSBC’s global priority market, Li said.
The lender posted NT$5.94 billion in pretax income last year, up 55 percent from 2011, buoyed by commercial and consumer banking businesses, according to data on the commission’s Web site.
The bank plans to open its 46th branch in Taiwan on April 10, its last after acquiring the troubled Chinese Bank (中華銀行) in 2007, Li said.