Bloomberg News

HSBC Said to Seek Buyer for Japan Retail-Banking Operations

February 01, 2012

(Updates with Thailand unit sale in 12th paragraph.)

Jan. 25 (Bloomberg) -- HSBC Holdings Plc, Europe’s largest bank, is seeking buyers for its Japanese consumer banking unit four years after starting the business, said three people familiar with the matter.

HSBC may sell HSBC Premier, the division that targets wealthy individuals in Japan, the people said on condition of anonymity because the plan isn’t public. The London-based bank has started an auction for the business, and may shut it if offers aren’t attractive enough, two of the people said.

The U.K. lender is scaling back in parts of Asia, including Japan, South Korea and Thailand, as Chief Executive Officer Stuart Gulliver cuts assets to reduce expenses and prepare for tighter capital rules. HSBC said yesterday that it agreed to sell operations in Costa Rica, El Salvador and Honduras to Colombia’s Banco Davivienda SA for $801 million to focus on bigger markets in Latin America.

“The possible sale means the profit outlook for the business is weak, and banks in Europe are keen to get rid of unprofitable assets,” said Toru Komatsu, who advises wealthy individuals in Japan as CEO of Komatsu Portfolio Advisors Co. “It’s difficult for foreign banks to compete with Japanese lenders that have larger networks, longer ties with clients and a deeper understanding of their assets and needs.”

Paul Allen, a spokesman for HSBC in Tokyo, declined to comment on the status of the Japanese retail unit.

‘Mass-Affluent’

HSBC, which opened its first Japanese branch in the port city of Yokohama in 1866, started services for “mass-affluent” customers -- people with savings of at least 10 million yen ($128,000) -- in Tokyo in 2008.

In 2010, it added retail offices in Osaka and Nagoya, the second- and third-largest metropolitan areas, bringing the total to six. HSBC’s three Tokyo branches are in the Marunouchi financial district, as well as Hiroo and Akasaka. Bank of Tokyo- Mitsubishi UFJ Ltd., a unit of Japan’s biggest banking group, had 772 branches nationwide as of Sept. 30.

HSBC and lenders including Citigroup Inc. and Standard Chartered Plc have been competing with Japanese banks for a share of household financial assets that totaled 1,471 trillion yen as of Sept. 30, according to central bank figures. Apart from retail services, HSBC has securities and asset management operations in Japan.

Reversing Expansion

Gulliver is reversing some of HSBC’s global expansion over the past two decades, selling assets and cutting jobs, while reinvesting some of the proceeds in faster-growing markets. In Japan, economic prospects are deteriorating as the population declines and deflation persists.

The Bank of Japan yesterday cut the economic growth forecast to 2 percent for the year starting in April, reflecting concern that the European sovereign debt crisis will slow exports. Shipments abroad fell 8 percent in December from a year earlier and the country posted its first annual trade deficit in 31 years, Finance Ministry figures showed today.

Last month, HSBC agreed to sell its Japanese private banking business to Credit Suisse Group AG. The sale of the unit, which managed assets of $2.7 billion as of Oct. 31, is expected to be completed in the second quarter of 2012, HSBC said in a statement in December, without disclosing the price.

Bank of Ayudhya Pcl, the Thai lender partly owned by General Electric Co., said it will buy HSBC’s consumer banking business in Thailand, for about 3.56 billion baht ($115 million), in a statement today. The division has about $553 million of assets, HSBC said separately.

KDB Financial Group Inc., South Korea’s largest state-run banking group, is in talks to buy HSBC’s branches in the country, the Seoul-based lender’s Chairman Kang Man Soo said on Jan. 5.

In Costa Rica, El Salvador and Honduras, HSBC had 136 branches serving corporate and consumer banking clients and held $4.3 billion of assets, the bank said in a statement yesterday. It will retain branches in Panama, Colombia, Nicaragua and the Bahamas.

--With assistance from Shigeru Sato in Tokyo. Editors: Russell Ward, Philip Lagerkranser

To contact the reporters on this story: Takahiko Hyuga in Tokyo at thyuga@bloomberg.net; Ambereen Choudhury in London at achoudhury@bloomberg.net; George Smith Alexander in Mumbai galexander11@bloomberg.net.

To contact the editor responsible for this story: Chitra Somayaji at csomayaji@bloomberg.net


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