HSBC Starts Private Banking Operations in China

March 31 -- HSBC Holdings Plc, Europe's biggest bank by market value, started private banking services in China as rising demand from the nation's growing ranks of millionaires helps counter slower growth in U.S. and Europe.

The bank will open the business in Beijing, Guangzhou and Shanghai, it said in a statement today. HSBC will target customers with a net worth of at least $10 million.

HSBC is concentrating on Asia and emerging markets such as Latin America after rising defaults on mortgages hit its North American operations, which made subprime loans to people denied credit by other banks. Established in 1865 in Hong Kong and Shanghai, HSBC has spent $5 billion to grow its China operations by setting up its own franchise and making acquisitions.

China fully opened its banking industry in December 2006, triggering a rush among banks including Citigroup Inc. and HSBC to compete for the nation's $2.5 trillion of household deposits. Foreign banks began incorporating their mainland units locally a year ago, to secure eligibility for offering bank cards and yuan- denominated services to Chinese residents.

HSBC's pretax profit in China jumped 28 percent last year to $165 million, Richard Yorke, chief executive officer of the bank's local unit, said in Shanghai today. Deposits rose 56 percent and loans increased 31 percent.

The bank plans to hire 2,000 people in China this year, Yorke said.

Increased Wealth
Chinese with at least $1 million of assets owned holdings totaling $1.7 trillion in 2006, the second-biggest pool of wealth in Asia, according to an annual survey by Capgemini SA and Merrill Lynch & Co. published in October.

London-based HSBC opened 31 outlets on the mainland and recruited almost 2,000 employees over the past year. The bank now has over 4,900 people and 66 branches and sub-branches in 17 cities, the most of any foreign banks in China.

HSBC increased 2007 profit by 21 percent as growth in Asia and other emerging markets outweighed losses on U.S. subprime- mortgage related assets. The U.K. bank owns stakes in Bank of Shanghai, Ping An Insurance (Group) Co. and Bank of Communications Ltd.

The bank secured 78 percent of its earnings from emerging markets, up from 55 percent in the second half of 2006. It appointed its first Asian board director, Vincent Cheng, last month. HSBC plans to sell shares in China when regulations permit.

By the end of 2006, 74 foreign banks had set up branches in China and another 186 had established representative offices in the country with 1.3 billion people and a growing middle class, according to the China Banking Regulatory Commission. Yet foreign banks accounted for only 1.3 percent of total assets in China's banking industry.

(Bloomberg)