Bloomberg News

HSBC May Expand China Branch Network or Increase BoCom Stake

February 15, 2012

(Updates to add shares in the last paragraph.)

Feb. 15 (Bloomberg) -- HSBC Holdings Plc, Europe’s biggest bank by market value, seeks to expand in China by increasing its branch network almost eightfold or boosting its stake in Bank of Communications Co. as regulations are eased.

HSBC paid $1.75 billion for 19.9 percent of BoCom, China’s fifth-largest lender, in August 2004, and operates about 110 outlets in the country under its own brand. Foreign banks are limited to owning less than 20 percent of Chinese banks and must get regulatory approval to open new branches.

Chief Executive Officer Stuart Gulliver “hopes to be allowed as reforms progress either to increase HSBC’s stake in BoCom beyond 20 percent, or build the HSBC branch network over the medium term toward 800,” Gareth Hewett, a Hong Kong-based spokesman for the lender, said in an e-mail to Bloomberg News.

HSBC is investing in emerging markets like China to focus on opportunities in faster-growing economies as it pares operations elsewhere to reduce costs. The U.K. bank announced at least 14 sales last year including the disposal of the private banking business in Japan and its retail bank in Chile, according to data compiled by Bloomberg News.

The momentum for reform in China’s financial industry isn’t slowing, Anita Fung, chief executive officer for Hong Kong of HSBC, told the Financial Times, which reported the expansion plan today.

HSBC’s China operations generated a pretax profit of $1.77 billion in the first half of 2011, of which more than three quarters came from sharing profits from investments in the country. HSBC has invested more than $5 billion in China’s financial service sector, according to the lender’s website.

Shares of HSBC rose 1.5 percent to HK$69.55 as of 11:53 a.m. in Hong Kong trading. BoCom advanced 2.5 percent to HK$6.22. The benchmark Hang Seng Index gained 1.9 percent.

--Editors: Nathaniel Espino, Russell Ward

To contact the reporter on this story: Stephanie Tong in Hong Kong at stong17@bloomberg.net

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


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