THE phones will have been buzzing at HSBC Holdings all last week. Never has there been more of a fevered atmosphere in the banking sector as there has been in the wake of the three mega-mergers seen in the past seven days alone. Following on from the astonishing US$70 billion merger between Citibank and Traveler's Corp two weeks ago, BankAmerica Corp and NationsBank quickly sidled into second place with a US$60 billion tie-up, while Banc One and First Chicago said they were also proposing a US$30 billion alliance. For HSBC, easily the most profitable bank in the world, the logic of catch-up seemed compelling. When, on Friday, Canadian Imperial Bank of Commerce (CIBC) and Toronto-Dominion Bank completed the triumvirate, announcing a C$45.8 billion (about HK$248.24 billion) deal, HSBC's boardroom was likely to have started feeling some pressure. Unlike the three mergers before it, the Canadian deal is truly on HSBC territory, where Hongkong Bank of Canada has been making a tidy profit for the group for many years, including last year, when it came in with a respectable 11 per cent profit rise of GBP61 million (about HK$796.23 billion). Also unlike the US markets - where all the big deals, up until Friday, had taken place - the Canadian banking market is much smaller, and can much more easily succumb to the aggressive margin-cutting and marketing techniques that a CIBC-Toronto combine could exercise. Analysts said the Canadian merger had created an 'odd man out' situation, in the form of Bank of Nova Scotia, which some believe could represent a fit for Hongkong Bank of Canada. 'It's possible they could put a call into Peter Godsoe,' said John Leonard, banks analyst at Salomon Smith Barney, referring to the executive president of Bank of Nova Scotia. 'It would be an opportunity for them to go from being a pocket player, to a national one, in one leap.' Indeed, while such a merger would strengthen HSBC's position in Canada, it would also prove to be a useful fit for the bank's emerging-market operations, given that Bank of Nova Scotia owns a 40 per cent stake in Solidbank Corp of the Philippines, 99.86 per cent of Banco Quilmes in Argentina, a 28 per cent stake in Chile's Banco Sud Americano, 25 per cent in Banco del Caribe in Venezuela and a soon-to-be 55 per cent stake in Inverlat of Mexico. These are all areas where HSBC might quite happily wish to build on its presence. Even in Britain, where HSBC's ownership of Midland Bank has proved to be one of the mainstays of the group's profits last year, there is potential to grow further. NatWest Bank, which has been forced to endure a painful restructuring as it sheds its investment banking business, is still looking vulnerable, and many analysts believe that if Britain's Barclays Bank - which has long been rumoured to be making a bid - manages to find a way through the morass of regulatory hurdles to make an offer, HSBC will not stand idly by. The cost savings and scale economies that would be generated by a Barclays-Midland tie-up would be substantial, and would turn any winning bidder into a formidable competitor in the British market. The rationale behind all these potential deals is undoubtedly compelling, but few bank sector watchers believe that HSBC - of all people - is about to take the bait. HSBC's established track record plainly shows that the group is resolutely determined never to pay more for something than it has to. Even the passing of the reins from longstanding chairman Sir William Purves, who was notoriously frugal, to his successor, John Bond, is unlikely to alter that strategy. 'They are happy to wait for as long as it takes to acquire things for less than their value,' said Hugh Pye, banking analyst at Flemings. 'They will never overpay, and they will never make a hostile bid.' Indeed most analysts, including Mr Leonard, said it was more likely it would remain business as usual at HSBC. Certainly this has been the reaction of the markets. After what some have termed 'irrational exuberance' in the wake of the huge US bank deals, which saw HSBC's share price jump more than 7 per cent in a week, a period of significant retracement has now ensued, which has actually seen HSBC's shares close lower last week than where they started in the first place. 'What is happening in America and Canada is not immediately related to HSBC,' Mr Pye said. He said the key aim of HSBC was maintaining growth in the markets, where it has its presence marked out: Hong Kong, the rest of Southeast Asia, Britain and Latin America. Only in terms of its stated ambitions to grow a little more aggressively in commercial banking is there thought to be scope for the group to feel some pressure from the newly formed Citigroup. Even in the United States, where HSBC Americas has Marine Midland, the huge tie-ups announced in the past week are expected to have a minimal impact. The highly localised franchise that Marine Midland has, particularly in upstate New York, is strong enough to prevent Citigroup, or any other amalgamation, breaking through. The Bank of New York, is thought to have a better chance, and if the worst came to the worst, HSBC could always sell Marine Midland, Mr Pye said. 'They only own it because they need a [US] dollar balance sheet, because they have got a huge dollar-clearing operation,' Mr Pye said, referring to HSBC's recent acquisition of JP Morgan's dollar clearing business. 'In the long-term, America will look like the UK does today; there will just be eight to 12 big coast-to-coast banks.' Mr Leonard said: 'I don't see [HSBC] likely to change anything about their strategy. 'They are not competing in businesses where scale economies are warranted.' He said the bank was not competing to take part in huge loan syndications, or underwriting large equity deals. 'The kind of investment banking they are in is very niche . . . and they are very good at it,' Mr Leonard said. If anything, the spate of mega-mergers is likely to play into HSBC's hands. 'They may get more calls from people who want to hook up with them,' said Mr Leonard. 'And when people are calling you, you are likely to get a better price if you want to buy.'