High investment costs will encourage mergers and acquisitions among Hong Kong's small- and medium-sized banks, HSBC general manager Raymond Or Ching-fai said yesterday. Mr Or, speaking at the opening of a branch in the Westwood Plaza, Western, said more mergers were inevitable but were complicated by the fact that many banks were run as family businesses. Mainland banks, deterred by Hong Kong's intense competition, were unlikely to be interested. He would not say whether HSBC would consider acquisitions, but pointed out it already had a sizeable market presence. He expected the United States Federal Reserve to cut another 25 basis points on rates next week. Hong Kong's economy would not benefit with a zero per cent interest rate, Mr Or noted. HSBC intends to accelerate expansion in China over the next couple of years in the wake of the rapid economic growth in the mainland. Mr Or said it was applying to the Chinese Government to upgrade representative offices in the west including Chongqing and Chengdu into formal branches. HSBC has 12 branches in 11 cities including Beijing, Dalian, Guangzhou, Qingdao, Shanghai, Shenzhen and Tianjin. In Hong Kong, Mr Or expected to see encouraging home mortgage lending figures for October following good residential sales.