Will he? Won't he? And does it matter?

Yesterday the Financial Times newspaper caused a brief stir in banking and financial circles when it reported that HSBC Holdings' new chief executive Stuart Gulliver would not be moving to Hong Kong.

The report appeared to signal an abrupt about-turn for the banking giant, which late in 2009 announced with great fanfare that it was moving its chief executive's office from London to Hong Kong.

HSBC was quick to deny the story, issuing a statement which insisted the Financial Times report was 'entirely incorrect'.

'The group CEO's principal office moved to Hong Kong in 2009,' it declared, 'and nothing whatsoever has changed.'

The statement is undoubtedly correct that nothing has changed. But that's because the previous chief executive's much-trumpeted relocation to Hong Kong was little more than a public relations move in the first place.

At the time HSBC was trumpeting its profitability and potential growth in Asia's fast-rebounding markets.

Meanwhile, the media were busy reporting that the banking giant would be the first foreign company to list its shares on the mainland. With regulatory approval expected any day, ran the stories, lead managers had already been appointed and an initial public offering in Shanghai was expected within months.

'The strategy of the group is Asia, so it's logical to be sitting in Asia,' former chief executive Michael Geoghegan told the South China Morning Post the day his move was announced. 'This is where the opportunities are going to be.'

Yet in reality, the move made little difference, either to Geoghegan or HSBC's operations. Geoghegan himself reckoned that he would spend only eight working days a month in Hong Kong, compared to six in the bank's London headquarters, with the rest of his time spent on the road visiting the bank's many far-flung offices.

Still, announcing his relocation looked like a smart PR move. It would help divert shareholders' attention away from the continuing multibillion-US-dollar-losses at HSBC's subprime lending business in America, and refocus investors on the bank's competitive advantages in Asia.

At the same time, it would give considerable face to the authorities in China. Hopefully that would strengthen HSBC's position with the mainland regulators and help secure approval for the offering, which HSBC wanted badly to promote the bank's brand in the mainland market.

Although HSBC has pumped billions of US dollars into building its presence on the mainland, like other international banks it has found the Chinese market tough to break into.

Hamstrung by regulatory restrictions, foreign banks have struggled to grow their businesses in recent years, even as the domestic banking sector has enjoyed explosive growth.

During the financial crisis, the growth of foreign bank assets on the mainland stalled (see the first chart) while their domestic rivals ramped up their own lending by 30 per cent or more.

As a result, the market share of foreign banks has nosedived, dropping from 2.4 per cent in 2007 to just 1.7 per cent two years later (see the second chart). Profits have slumped too, falling 45 per cent in 2009, according to banking consultancy Celent.

With limited branch networks, foreign banks on the mainland have failed to attract sizeable deposits, relying instead on funding from overseas parents and the interbank market. As a result, their loans - largely to international companies operating on the mainland - have far exceeded their deposits.

Now, in a new blow, mainland regulators have instructed foreign banks to reduce their loan-to-deposit ratios to 75 per cent in line with domestic banks, which will severely restrict their ability to make loans.

Meanwhile, a year on from the date HSBC was expected to list in Shanghai there remains little prospect of regulatory approval for a share offering, and no solution to HSBC's concerns about a lack of fungibility between the mainland and offshore stock markets.

As a result, HSBC's public relations exercise announcing its chief executive's move to Hong Kong has achieved little, at least as far as lubricating its penetration of the mainland market is concerned.

So perhaps it would not be too surprising if the new chief is a little less enthusiastic than his predecessor about basing himself in Hong Kong, even though HSBC does insist that 'nothing whatsoever has changed'.