HSBC banks on vigorous mainland expansion

PUBLISHED : Monday, 24 December, 2007, 12:00am
UPDATED : Monday, 24 December, 2007, 12:00am


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HSBC Holdings, the parent of Hong Kong's biggest lender, plans to boost its mainland operations by hiring an additional 4,000 staff and opening another 100 outlets over the next two years.

The bold expansion plan follows stinging criticism of the bank's management for what shareholder activists alleged was neglect of its own Asian backyard at the expense of what they said was an underperforming share price.

However, the pace of new branch openings in the mainland has been steadily increasing since local incorporation in April, Peter Wong Tong-shun, an executive director of the bank's Asia-Pacific unit, said.

HSBC was among the first foreign banks to win approval from the mainland banking regulator to incorporate in the country - a move that allowed it to offer a wider range of yuan-denominated services to customers, Mr Wong said.

'The resulting growth of both our deposits and loans has surpassed our original targets,' he said.

HSBC has 54 branches and sub-branches in the mainland, almost double the 30 outlets it operated early this year, while staff numbers have increased to about 4,500 from more than 2,000, Mr Wong said.

However, the expansion was only the beginning of a major upgrade of the bank's mainland operations, he added.

Also on the cards is an expansion into western and central regions of the country.

The bank plans to open 40 to 50 branches and sub-branches over the next two years and hire at least 2,000 employees each year to cope with the expansion.

Mr Wong added that the bank planned to open six to 10 rural mainland banks next year after it opened its first village bank early this month.

However, finding suitable recruits would be a challenge, he warned, as both foreign banks and local lenders are engaged in fierce competition for talent.

Lending in the mainland has shown a general slowdown since October, he said, but HSBC was nonetheless confident that it could achieve sizable growth for the whole year.

The slowdown was in line with regulatory moves from the China Banking Regulatory Commission which instructed lenders who had already achieved loan growth of 15 per cent or more this year to slow the pace of further loan expansion.

The mainland assets of overseas banks totalled US$154 billion at the end of October, up 41 per cent from a year earlier and accounting for 2.24 per cent of the total assets of mainland financial institutions.

Mr Wong said that mainland authorities might want lenders to avoid over-lending to certain industries, such as the property sector, but there might be fewer restrictions on other sectors or in provinces that the government wanted to develop.

'It may be an opportunity for foreign lenders; if local banks cannot meet all their customers' needs, some might look to borrow from foreign banks,' he said.

Looking ahead, Mr Wong said he saw the mainland as an increasingly important profit contributor among the emerging markets in which the group operates.

HSBC group chairman Stephen Green last month said the bank would focus on emerging markets, with contributions from Asia and emerging markets likely to account for 60 per cent of earnings, from 51 per cent in the first half of this year.

Mr Wong said the operating environment in the mainland would remain good as economic growth was likely to be sustained at 8 to 10 per cent next year.

'More important is that the increasing trade flow between mainland and countries in Southeast Asia and elsewhere will provide business opportunities for HSBC as a whole,' he said.