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SCMP Reporter

Lender committed to 19.9pc Bank of Communications stake, though it is unable to buy partner's A shares

HSBC Holdings, the world's third-largest bank by market value, plans to maintain its 19.9 per cent stake in Bank of Communications after its mainland partner's A-share listing in Shanghai, according to its group chief executive Michael Geoghegan.

'I've seen no reason why we would not maintain a similar shareholding in the future as we are today,' Mr Geoghegan said yesterday.

Bank of Communications, the mainland's fifth-largest lender,   last week said it planned to sell up to 4.5 billion in yuan-denominated A shares in Shanghai without giving a timetable.

The shares are worth as much as US$4.06 billion based on the closing price of the bank's H shares yesterday at HK$7.04.  HSBC's stake may be diluted to 18.1 per cent after the sale if it does not  buy any more shares of the mainland lender.

However, because of mainland regulatory rules on foreign investors, HSBC can not buy Bank of Communication's A shares directly.

The bank may chose to buy the shares through the qualified foreign institutional investors scheme or the Hong Kong-listed shares.

Mr Geoghegan declined to comment how the bank would maintain its stake.

'We are reviewing our position and we are working with the management team [of Bank of Communications],' he said.

Mr Geoghegan said HSBC was also reviewing its 19.9 per cent stake in Ping An Insurance, the mainland's second-largest life insurer that also plans to sell A shares in Shanghai.

He said HSBC would continue to invest in China and Asia, which showed double-digit growth, and other emerging markets with large growth potential such as  the Middle East and Latin America.

HSBC, which derives about 60 per cent of its pretax profit from Europe and North America, is pinning hopes on emerging markets such as China amid concerns that earnings from the United States and Britain  are slowing.

HSBC's mainland unit, although small compared with  its other operations, posted a 74 per cent growth in pretax profit to US$280 million in the first half of this year over same period  last year.

Mr Geoghegan, who took up the post as group chief executive in May in a senior management reshuffle, hopes he can  continue to deliver double-digit growth of earnings per share for shareholders.

However,  US finance unit, HSBC Finance, recorded a disappointing third quarter result as loan growth slowed  and credit quality weakened.

Mr Geoghegan said the deterioration in secondary mortgages was mainly because disposable income in the US was beginning to drop, so some homeowners adjusted their mortgage payments.

In the UK, he said fee structure reviews by authorities might reduce income in the industry and  increase bankruptcy applications.

Separately, the bank said its Malaysia unit, HSBC Bank Malaysia, posted a 23.1 per cent rise in  pretax profit in the first nine months this year, to M$706 million  (HK$1.5 billion),  against M$574 million  over the same period a year ago.



HSBC to keep mainland stake