Foreign lenders pursue mainland push amid curbs
Foreign lenders will continue to expand on the mainland this year, but market watchers expect them to face multiple challenges as Beijing acts further to cool the overheated economy, and as the war for talent intensifies.
Banks such as HSBC and Bank of East Asia said their business development across the border was in line with or surpassed their expectations after incorporating on the mainland in April.
HSBC has 54 outlets across the border, almost double the 30 outlets it had early last year. Meanwhile, its staff numbers increased to about 4,500 from about 2,000.
BEA expanded its presence by 17 outlets last year to 49 and increased its manpower about 70 per cent to 2,550 employees.
Last year, the mainland allowed foreign banks that incorporated their business there to offer a wider range of yuan-denominated services.
'The resulting growth of both our deposits and loans has surpassed our original targets,' said Peter Wong Tong-shun, the executive director of HSBC's Asia-Pacific unit.
Some analysts, however, expressed concerns that the loan growth of foreign lenders might slacken amid the austerity measures.
As of October last year, the mainland assets of overseas banks totalled US$154 billion, up 41 per cent from a year earlier but was only 2.24 per cent of the total assets of mainland financial institutions.
It was reported earlier that Beijing was limiting the loan growth of commercial banks to 12 per cent this year, down from 15 per cent. For the first time, it has extended its policy to cover foreign banks.
Mr Wong said the bank had submitted this year's business plan to the China Banking Regulatory Commission but had yet to be told that any adjustment was needed.
He said macroeconomic measures might not have a significant impact on foreign lenders as they only account for a small portion of the market.
'The lending restriction to foreign banks could be more flexible,' said William Wong Kwok-wai, an analyst at BOCI Research.
For foreign banks, the bigger challenge was to attract yuan deposits as they needed to meet the required loan-to-deposit ratio of 75 per cent by 2011, he said.
A banker from another foreign lender that set up a mainland unit last year said different banks would have different quotas.
The quota for his bank, which he refused to identify, was well above 12 per cent.
'Some foreign banks still target 30 per cent to 40 per cent loan growth this year,' said an analyst from a United States brokerage.
Mr Wong at HSBC said the bank's greatest challenge was attracting sufficient talent to cope with business growth. HSBC plans to hire 2,000 more employees and open as many as 50 outlets this year.
Chan Kay-cheung, a vice-chairman of BEA (China), agreed: 'The mainland's banking industry is developing rapidly. Even local lenders are looking for skilled staff.'
Jerry Chang So-ping, a director at Barons & Co, an international executive search company, said banks had been paying a premium of 30 to 50 per cent to recruit staff for their mainland operations.
'Some individual banks are even willing to pay a premium of up to 100 per cent to hire people of high calibre,' said a market watcher.
