HSBC seeks acquisitions that match its own business plans
Lender in no rush to buy and prefers to expand organically
HSBC Holdings, the world's fourth-largest bank by market value, is interested in acquisitions in the Asia-Pacific that would complement its own business growth, according to a senior executive.
'We prefer to grow our business organically and would look for opportunities that could incrementally help our business,' said Michael Smith, the president and chief executive at Hongkong and Shanghai Banking Corp, the Asia unit of HSBC.
HSBC has been criticised by analysts that it missed out on acquisition opportunities in Asia such as Korea and Taiwan to rivals such as Standard Chartered Bank and Citigroup.
However, Mr Smith said the bank expected to continue to perform well with its existing businesses in the region with investment in its own operations as well as equity investments.
HSBC's pre-tax profit in the Asia-Pacific excluding Hong Kong rose more than 30 per cent in the past three years. Including Hong Kong, the region accounted for close to 40 per cent of HSBC's total earnings and its share is expected to increase to 45 per cent in five years.
'The only [acquisition] I regret' missing was in South Korea, Mr Smith said. However, he said acquisition opportunities in the nation were limited despite speculations of foreign lenders buying the Korea Exchange Bank, which Mr Smith described as 'a political hot potato'.
In Taiwan, he said the banking industry would further consolidate but HSBC was not in a hurry for acquisitions.
Mr Smith said the bank had no need for 'transformational acquisition' in the region, but was interested in making purchases in India, Thailand or Vietnam if regulations allowed. It might buy businesses such as insurance which could add value to its existing business, he said.
Mr Smith also said the bank had made adequate strategic investments in the mainland and domestic securities was the only missing piece.
'We must have something there in the long term,' he said.
Fuelled by its strategic investment, HSBC's pre-tax profit in the mainland rose 112 per cent to US$708 million last year, but its organic business growth was 55 per cent.
Mr Smith said growth in the mainland's banking industry would be 'a bit slow' this year as the central government was looking to restrict economic growth to high single digit or low double digit.
He expected some breakthrough on setting up an insurance joint venture in the mainland this year.
Meanwhile, Mr Smith said the bank's stake in Bank of Communications could be diluted to 18.1 per cent from 19.9 per cent when the mainland lender listed shares in the A-share market.
'We are still trying to look for ways [to maintain the holding],' he said.
Bocom aims to raise as much as 20 billion yuan by selling up to 4.5 billion A shares in the first half this year. HSBC does not have the right to prevent its stake from being diluted.
