HSBC, StanChart to keep up China expansion in 2009

SHANGHAI, March 11- HSBC Holdings Plc and Standard Chartered Plc , the two biggest foreign banks in China, said on Wednesday they would continue to expand in the country despite global cost-cutting by banks struggling to survive the financial crisis.

HSBC China, whose pretax profit surged 85.2 percent last year to 2.19 billion yuan ($320 million), plans to boost its number of outlets in 2009 to 100 from 82 and will hire 1,000 employees to support the expansion, it said in a statement.

Rival Standard Chartered aims to add 11 to 15 sub-branches in China in 2009, its China consumer banking head Wilson Chia said in an interview.

He added that the bank would continue investing in people but gave no projections for staffing levels in China, which have risen five-fold to 2,000 over the past three years.

The China expansion plans at HSBC, Europe's largest bank, contrast with its plans to shut its U.S. consumer lending business, cutting 6,100 jobs.

"Our growth was driven by China's stimulus efforts, which enabled continued economic growth and market confidence amid the global financial crisis," HSBC said.

(Reuters)

Hopu Fund buys stakes in Bank of China

HONG KONG -- A private-equity fund run by Fang Fenglei, Goldman Sachs Group Inc.'s China partner, purchased about $400 million of shares in Bank of China Ltd. from Royal Bank of Scotland Group PLC, according to a person familiar with the situation.

Hopu Investment Management Co., a $2.5 billion fund that Mr. Fang raised last year, bought the shares when RBS sold its entire stake in the Chinese lender for $2.4 billion this past week.

Hopu invested as part of a group it arranged that bought roughly $700 million of the U.K. bank's shares, according to the person. The person declined to disclose the other members of that investor group.

The purchase appears to be a bet that investors have oversold shares of Bank of China, which trade at a discount to its state-owned peers Industrial & Commercial Bank of China Ltd. and China Construction Bank Corp.

Meanwhile, the head of China Investment Corp. on Friday said the sovereign-wealth fund has been increasing its stakes in ICBC, CCB and Bank of China. CIC Chief Executive Lou Jiwei made the comments on the sidelines of a briefing Friday in Beijing.

Hopu's investment is its second major deal after it invested about $200 million in a Mongolian mining project. Singaporean state investment fund Temasek Holdings Pte. Ltd. and Goldman Sachs are among the major investors in the Hopu fund.

Mr. Fang helped Goldman Sachs set up its China securities joint venture, Goldman Sachs Gaohua Securities Co., in late 2004. He still owns a stake in that venture and is the venture's chairman. Mr. Fang stepped back from day-to-day duties at Goldman Sachs when he launched the Hopu fund.

Several foreign strategic investors have been selling their shares in China's state banks following the expiration of lock-up agreements from when the stakes were purchased. The sales have exerted downward pressure on Chinese banking stocks.

(WSJ)

HSBC Sticks With China as RBS, UBS Sell Stocks to Raise Capital

Jan. 16 -- HSBC Holdings Plc, the biggest investor in China among global banks, is sticking to its bet on the world’s fastest-growing major economy as rivals sell out and analysts say the lender may need fresh capital.

Established in 1865 in Shanghai, HSBC has more than $12 billion invested in Chinese financial companies, including Bank of Communications Ltd. and Ping An Insurance (Group) Co. The London-based company has kept its holdings, while Royal Bank of Scotland Group Plc and UBS AG sold shares of Chinese lenders in the past month.

HSBC’s commitment to China, where it owns more branches than any foreign bank, may pay off should the country’s economy skirt the recession roiling the U.S. and Europe. The strategy also puts pressure on Chief Executive Officer Michael Geoghegan to come up with cash to cover a funding shortfall that analysts at Morgan Stanley estimate to be as much as $30 billion.

“China has got to be the right place to be in the longer term,” said Julian Chillingworth, chief investment officer at London-based Rathbone Brothers Plc, which manages about $21 billion and holds HSBC shares. “In the next five years, HSBC’s business in China is going to grow.”

HSBC fell 7 percent in London trading yesterday to the lowest in almost a decade. The stock has dropped 14 percent since Jan. 13, when Morgan Stanley analysts, led by London-based Michael Helsby, said HSBC may need to sell shares and cut the dividend by 50 percent to shore up its balance sheet.

Commitment Reaffirmed

Among HSBC’s Chinese investments is a 19 percent stake in Bank of Communications, the nation’s fifth-largest. The holding was worth $6.7 billion at yesterday’s closing price, after BoCom dropped 44 percent in the past year. HSBC also owns 16.8 percent of Ping An, China’s second-biggest insurer; 8 percent of closely held Bank of Shanghai; and 49 percent of a fund-management venture with Shanxi Trust & Investment Corp. Ping An and Bank of Communications shares aren’t subject to lockup restrictions.

While 55-year-old Geoghegan faces pressure to raise funds, he may balk at eroding ties with China, where HSBC was the first bank to win approval to invest in a local lender. The company bought its stake in Bank of Shanghai in 2001.

“A presence in China is core to HSBC’s strategy,” said Sandy Chen, a London-based analyst at Panmure Gordon & Co., who recommends clients sell the stock. “Beginning to signal a pullback from China is directly opposite to market perceptions of what makes a safe haven.”

HSBC reaffirmed its commitment to China on Jan. 8, when the company said there are no plans to reduce its holding in Shanghai-based Bank of Communications. HSBC made the statement after Hong Kong billionaire Li Ka-shing sold a $511 million stake in Beijing-based Bank of China Ltd.

David Hall, an HSBC spokesman in Hong Kong, declined to comment on the bank’s other Chinese assets.

‘Long Haul’

HSBC has “a very long-term view of China and wants to be here for the long haul,” said Cameron Odgers, a Beijing-based analyst at China International Capital Corp.

Paring the Bank of Communications stake would probably damage HSBC’s business in China, said Bonnie Lai, a Hong Kong- based analyst at CCB International Securities Ltd. HSBC is awaiting government approval for a planned credit card joint venture with Bank of Communications, and also wants permission to raise its holding in the Chinese lender beyond the regulatory maximum of 20 percent.

“If they sell this time, the likelihood of approval will be smaller,” Lai said.

HSBC and BoCom have close ties, said Zhu Kepeng, head of Bank of Communications’s board office. The banks’ chairmen have met twice a year since 2003, and senior executives from the companies get together monthly, he said. Bank of Communications Chairman Hu Huaibang has met with senior HSBC managers, including Chairman Stephen Green, three times since taking the job on Oct. 10, Zhu said.

Banks Cash Out

HSBC, Royal Bank of Scotland, Bank of America Corp. of Charlotte, North Carolina, Zurich-based UBS and Goldman Sachs Group Inc. in New York were among foreign banks that spent a combined $22 billion between 2004 and 2006 to purchase stakes in Chinese lenders.

The overseas firms touted the strategic nature of their investments and pledged to work with their Chinese counterparts on everything from risk management to information technology systems.

As the deepening global financial crisis coincides with the end of so-called lockup periods for their holdings, some banks are cashing out. Edinburgh-based Royal Bank of Scotland sold its $2.37 billion stake in Bank of China on Jan. 13, two weeks after UBS divested all its shares. Bank of America sold $2.8 billion of shares in China Construction Bank Corp. on Jan. 7.

Sticking with BoCom may produce longer-term benefits for HSBC, said fund manager Leo Gao.

“HSBC’s commitment won’t go unnoticed by the Chinese government,” said Gao, who oversees the equivalent of $2.3 billion at APS Asset Management in Shanghai. “They would be rewarded big in the future.”

(Bloomberg)

China Life 2008 premium income jumps 50% to $43.2 billion

HONG KONG -- China Life Insurance Co said Thursday its premium income for 2008 amounted to 295.6 billion yuan ($43.23 billion), an increase of about 50% from a year earlier. The disclosure was made to the Hong Kong Stock Exchange after the close of trade Thursday. China Life, the mainland's largest insurer, had premium income of 196.6 billion in 2007. Shares of China Life ended 2.4% lower in Hong Kong.

(MarketWatch)

RBS Selling Bank of China Stake at Profit

HONG KONG -- Royal Bank of Scotland Group PLC is raising up to US$2.37 billion by selling its entire holding in Bank of China Ltd., profitably unwinding a strategic investment the British lender made more than three years ago.

The bank is selling its 4.3% stake to institutional investors at between HK$1.68 and HK$1.71, (between 21.7 and 22 U.S. cents) each, a 7.6% to 9.1% discount to Bank of China's Hong Kong closing price of HK$1.85 a share Tuesday, according to people familiar with the situation. Morgan Stanley and RBS are jointly arranging the sale and were placing the shares before the market reopened Wednesday.

Foreign strategic investors have been shedding their stakes in Chinese banks as lock-up periods expire on shares purchased before China listed its largest state banks. Western banks are selling their holdings to raise capital as concerns also mount that China's banks will be saddled with a new wave of bad loans as the country's economy slows.

RBS bought the 10.8 billion Hong Kong-listed H shares in 2005 for HK$1.14 each, according to analysts, and could thus make a profit of as much as HK$6.16 billion (US$794.3 million) from the sale, despite the decline in the Chinese bank's shares in the past year. Bank of China shares fell 44% in 2008 and are down 13% this year.

Wang Zhaowen, a spokesman at Bank of China, China's second-biggest bank by assets, said the two banks would be issuing a joint statement but didn't elaborate.

Any proceeds from a sale would help the U.K. bank, which has pledged to redeem £5 billion (US$7.4 billion) in preference shares issued to the U.K. government at a coupon of 12% in the next 18 months.

Associated Press

A branch of the Royal Bank of Scotland is seen in London.

RBS bought the shares in Bank of China ahead of the latter's Hong Kong initial public offering three years ago. It led an investor consortium, including a foundation owned by Li Ka-shing, one of Asia's richest men, Merrill Lynch & Co., hedge funds D.E. Shaw & Co. and Och-Ziff Capital Management LLC, and private-equity firm Oaktree Capital Management LLC, in paying a total of US$3.1 billion for a 10% stake in the Chinese lender.

The lockup period for the consortium's shares expired Dec. 31.

The Li Ka Shing Foundation raised US$511 million last week from its sale of two billion of its five billion Bank of China shares, just days after UBS AG sold its entire 1.33% stake in Bank of China for US$808 million.UBS sold its Bank of China stake on New Year's Eve. Bank of America Corp. trimmed its China Construction Bank Corp. holding last week, raising $2.8 billion.

(WSJ)

Li Ka Shing Foundation Sells Bank Of China Shares

HONG KONG - The Li Ka Shing Foundation is selling two billion shares in mainland lender Bank of China Ltd. in a placement that could raise up to US$524 million for the charitable foundation owned by Hong Kong's richest man, according to a term sheet seen by Dow Jones Newswires and a person familiar with the situation.

The two billion Hong Kong-listed H shares are being placed to investors at HK$ 1.98-HK$2.03 each, a discount of between 5% and 7.5% to their Wednesday closing price of HK$2.14, according to the term sheet.

Li Ka-shing's foundation bought the shares during the 2006 initial public offering of Bank of China as part of a syndicate that was led by Royal Bank of Scotland Group PLC (RBS) and included Merrill Lynch & Co. (MER), which is the sole bookrunner of Wednesday's placement.

The syndicate invested a total of US$3.1 billion for a 10% stake in Bank of China, China's second-largest lender by assets after Industrial & Commercial Bank of China Ltd., ahead of the bank's Hong Kong listing in June 2006.

Bank of China's shares were priced at HK$2.95 each during its US$11.2 billion IPO, which at the time was the biggest listing on record by a Chinese company. It wasn't immediately clear how much the foundation paid for its stake.

Li Ka Shing Foundation Still Holds Stake

The Bank of China shares sold Wednesday amount to around 30%-40% of shares held by Li through the foundation, the person familiar with the situation said.

The foundation's remaining Bank of China shares are subject to a lockup period of 90 days, according to the term sheet.

Wednesday's placement comes a week after UBS AG (UBS)sold its entire 1.33% stake in Bank of China. People familiar with the situation said the deal raised US$808 million for the Swiss bank.

Earlier Wednesday, Bank of America Corp. (BAC) confirmed it had raised US$2.8 billion by cutting its stake in China Construction Bank Corp. (0939.HK) to 16.6% from 19.1%.

Western banks, grappling with the credit crunch and the need to raise funds, are increasingly expected by analysts to cash out of once hotly contested stakes in Chinese banks to build up their balance sheets.

The lockup on RBS's stake in Bank of China expired late last month. RBS is now 58%-owned by the U.K. government after a bailout.

Other investors in Bank of China include Temasek Holdings Pte Ltd. with a 4.13 stake, and the Asian Development Bank and Bank of Tokyo-Mitsubishi UFJ Ltd., which each own a 0.2% stake. The lockup on Temasek's holdings also expired last month.

The Li Ka Shing Foundation supports numerous charitable activities with grants, sponsorships, and other commitments, according to its Web site.

(Dow Jones)

Deutsche Bank Fets China OK for Share Deals

HONG KONG -- Deutsche Bank AG has become the latest foreign bank to receive approval for its Chinese joint venture to underwrite and sponsor deals in China's securities market.

Under the terms of the agreement approved by the China Securities Regulatory Commission, Shanxi Securities Co. will hold 66.7% of the venture and Deutsche Bank will hold the rest. The venture, named Zhong De Securities Co., will underwrite and sponsor the listing of yuan-denominated A shares, foreign currency-denominated B shares, and bonds, Deutsche Bank said Tuesday.

In late December, Credit Suisse Group said its brokerage joint venture with Founder Securities Co., which was set up in early 2008, had received a similar approval.

Until Credit Suisse and Deutsche Bank got their go-ahead, Goldman Sachs Group Inc., UBS AG, CLSA Asia-Pacific Markets and Morgan Stanley were the only global investment banks with securities platforms in mainland China.

(WSJ)

Rogers Says He’s Buying China Shares in Hong Kong

Dec. 31 -- Jim Rogers, chairman of Rogers Holdings, said he’s been buying shares of Chinese companies even as growth in the world’s fourth-largest economy slows.

Rogers started buying Chinese shares in 1988 and is now favoring equities traded in Hong Kong and Singapore that are cheaper than yuan-denominated stocks in Shanghai.

China is slowing but “some parts of the Chinese economy will be totally unaffected by what happens in the West,” Rogers said in an interview today in Hong Kong. “I started buying in October again. I never sold any Chinese shares.”

The nation’s economic growth is slowing as recessions in the U.S. and Europe stem demand. China’s exports fell for the first time in seven years in November, imports plunged and output contracted by a record. Hong Kong’s Hang Seng China Enterprises Index, which tracks Chinese companies’ so-called H shares, has plunged 51 percent this year, its worst annual performance since at least 1994. The CSI 300 Index, which tracks yuan-denominated A shares listed on China’s two exchanges, tumbled 66 percent in 2008.

Rogers said he has been buying Chinese agricultural stocks because of the government’s support measures. Other industries he favors are infrastructure in China, water and tourism in Asia. He didn’t name any specific stocks.

Premier Wen Jiabao unveiled a 4 trillion yuan ($583 billion) stimulus package that included spending on roads and bridges last month. The Chinese government will increase spending by a “relatively big margin” and cut taxes next year, China National Radio, a state radio service, reported Dec. 10, citing the annual Central Economic Work Conference.

(Bloomberg)

China Construction Bank wins UK regulatory approval to open London unit

BEIJING - China Construction Bank (CCB) said it has received approval from the UK's Financial Services Authority to set up a wholly-owned unit in London, its first in Europe.

The unit's operations will cover deposits and loans, trade finance, foreign-exchange trading and financial derivatives.

China Construction Bank is also setting up a wholly-owned branch in New York after receiving Federal reserve approval this week.

The bank is also seeking to set up branches in Vietnam and Australia.

Currently, the bank has branches in Hong Kong, Singapore, Frankfurt, Johannesburg, Tokyo and Seoul, as well as two wholly owned units in Hong Kong and a representative office in Sydney.

(XFN-ASIA)

Fed approves China Construction Bank branch in US

WASHINGTON, Dec 8 - The U.S. Federal Reserve on Monday said it approved an application by China Construction Bank Corp to open a branch in New York.

The proposed New York branch would engage in wholesale deposit taking, lending, trade finance, and other banking services, the Fed said in a statement.

China Construction Bank Corp has assets of approximately $1.1 trillion and is the second largest bank in China, the Fed said. The Chinese government owns about 57 percent of the bank's shares.

(Reuters)

Sarkozy: Asia-Europe summit "helpful" to tackle financial crisis

French President Nicholas Sarkozy on Saturday called the seventh Asia-Europe Meeting very "helpful" for Asia and Europe to tackle the global financial crisis and build up common cause.

During the two-day meeting, European and Asian leaders representing nearly half of the world population had had in-depth dialogues on all crucial topics including financial, monetary and economic issues, Sarkozy told a press conference here at the end of the meeting.

"We had discussed nearly all of the topics concerned by the two continents including the most difficult issues," he said.

Calling the summit "another great event" after the Beijing Olympic Games, he said it offered a new, important and sound opportunity to hear voices from Asia and Europe.

To tackle the current global financial crisis, Sarkozy said that China, India, the Republic of Korea and Indonesia would play a major part in the G20 summit slated for Nov. 15 in Washington.

(www.asem7.cn)

China welcomes US financial rescue deal

BEIJING — China Saturday welcomed US lawmakers' approval of a 700-billion-dollar financial sector bailout plan, state media reported, quoting a central bank spokesman.

"We are glad to see the passage of the rescue bill by the House of Representatives and the Senate despite earlier twists and turns," the People's Bank of China spokesman was quoted as saying.

"The Chinese government has been closely following the developments of the US financial crisis and its impact," he said.

The official said Chinese authorities "hoped that it would be implemented as soon as possible and achieve positive results," Xinhua reported.

"China and the United States of America share common interests in stabilising a stable financial market," he said.

The US House of Representatives approved the revised 700-billion-dollar package Friday, on its second try, bowing to intense pressure to help avert a global economic meltdown.

The bill, which was quickly signed into law by President George W. Bush, marks the largest US government economic intervention since the 1930s Great Depression.

The bailout gives the US Treasury power to buy up toxic mortgage debt which has been choking the financial industry and would create a 700-billion dollar federal programme to buy bad assets from banks and other financial firms.

(AFP)

China's ICBC opens Sydney branch

China's largest bank, the Industrial and Commercial Bank of China (ICBC), has opened its first Australian branch in Sydney.

ICBC was granted a banking licence by the Australian Prudential Regulation Authority in May, becoming the tenth foreign subsidiary bank in Australia.

ICBC operates in Hong Kong, Macau, Singapore, Frankfurt, Luxembourg, Seoul, Tokyo, London and Kazakhstan, as well as in more than 35 Chinese locations.

Beijing-based ICBC was founded in 1984 and took on the industrial and commercial credits and savings businesses originally transacted by the People's Bank of China.

ICBC is listed on the Shanghai and Hong Kong stock exchanges, and had a market capitalisation of $US338.9 billion ($A404.17 billion) by the end of 2007 making it the largest listed bank by market capitalisation in the world.

Rival China Construction Bank opened a representative office in Sydney last year.

(The Age.com.au)

Bank of China buys stake in France's Rothschild

HONG KONG -- Bank of China will take a 20% stake in France's La Cie. Financiere Edmond de Rothschild, as part of a businesses cooperation plan that will see the two banks expand offerings into each other's respective markets.

Bank of China will pay 263.3 million euros ($377.9 million) for the stake, the bank said in a filing with Hong Kong security regulators late Thursday.

"Both parties have agreed to focus on areas of asset management, private banking and custody services, and jointly expand into mutually interested markets," the Bank of China said in the filing.

The deal marks the first strategic investment by a Chinese bank in a European bank, the Wall Street Journal reported

The deal will help Edmond de Rothschild expand internationally by furthering its access to investors in China. LCFR is a unit of LDF Rothschild Group, which has about 100 billion euros under management. LCFR manages about a third of that amount.

Bank of China's group executive vice president Zhu Min was cited in wire reports as saying the deal would help it channel Chinese funds into France and Europe.

Bank of China is the world's fifth biggest by market value.

(MarketWatch)

Foreign insurers face barriers to enter China

Regulatory barriers, intensifying competition and high staff turnover are among the obstacles that could dent the China expansion plans of foreign insurance companies, according to a study.

About 45 foreign insurers have allied to Chinese partners to set up mainland operations but many are frustrated by restrictions governing joint venture structures, branch locations and product offerings, according to a study by PwC, the professional services firm.

EDITOR’S CHOICE

Lex: China Life - Apr-28

China Life to focus on deals closer to home - Mar-27

China Life seeks access to private equity - Mar-04

China insurers face record payout - Feb-14

Lex: Chinese earnings - Feb-13

More bad weather stalls China recovery - Feb-03

“The foreign insurers believe they continue to be hindered by barriers to market access,” said Peter Whalley, PwC assurance partner and co-editor of the study, which is based on interviews with 28 senior executives of foreign-backed ventures operating in China.

The ventures have built up a 6 per cent market share in China and foreign insurers project sales growth in life insurance of between 30 per cent to 50 per cent and a rise in sales of property and casualty insurance of between 20 per cent to 40 per cent.

Most respondents to the survey believe foreign insurers would achieve 10 per cent market share by 2011.

However, both domestic and foreign insurance companies expect to face stiff challenges from China’s powerful banks, which have recently been granted approval to acquire stakes in insurers and are rolling out bancassurance products.

The study found that foreign insurers were “unclear on how successfully their products will be allowed to compete with the banks’ own proprietary insurance offerings”.

American International Group, Aviva, Generali, Prudential and Allianz are the top five foreign insurers in China ranked by premium income. A further 20 overseas insurers are expected to enter the market in the next three years.

Human resource issues are also weighing on the minds of foreign insurers. Wage inflation is running at close to 20 per cent while more than two-thirds of participants report staff turn-over this year of up to 24 per cent.

“A lack of talent also impacts on the foreign insurers’ ability to achieve first rate compliance,” the report adds.

In spite of the challenges, China remains attractive to foreign insurers because of its strong growth and enormous potential.

According to the China Insurance Regulatory Commission, premium income from life, health and property insurance in the first half of this year was Rmb562bn ($82.2bn), a 51 per cent rise on the same period last year.

Penetration rates, which are low by international standards, are expected to rise in line with the increase in wealth and the greater awareness of the need for insurance following events such as this year’s Sichuan earthquake.

According to the report, life insurance premium against gross domestic product is 1.7 per cent in China, compared with 4.1 per cent in India, 8.3 per cent in Japan and 13.1 per cent in the UK.

(FT)

Lockton Granted Wholly Owned License in China

Insurance Broker to Launch Operations in Shanghai

LONDON & SHANGHAI, China, Sep 05, 2008-- The China Insurance Regulatory Commission (CIRC) has granted Lockton a Wholly Owned Foreign Enterprise (WOFE) insurance broking license to operate in China.

The new license underscores Lockton's plans to accelerate the introduction of international best practice standards and practices to the insurance broking industry in China, a leading CIRC initiative. The firm will operate, subject to final business registration, as Lockton Companies (Shanghai) Insurance Brokers Ltd. and plans to commence business in late September 2008.

Lockton, the world's largest privately owned, independent insurance broker, is only the second foreign enterprise to be granted a wholly owned insurance broking license in China. Lockton has operated in Asia for more than 30 years and was one of the first companies (then as Alexander Forbes) to establish a representative office in China in Beijing in 1996.

Lockton International CEO Julian James said: "It is a considerable honour to be awarded a WOFE insurance broking license in China. We are very grateful to be given the opportunity to assist in the development of the Chinese market and to introduce our international risk management and insurance broking experience.

"We are committed to continually introducing innovative risk transfer and insurance solutions and to educate and assist corporate insurance buyers in best practice insurance purchase strategies. This process of buyer education in China will be complemented by a team of local insurance executives who will open the office. The local Shanghai team will be supported by Lockton experts around the world."

James added: "Lockton's private ownership model allows the firm to commit a single-minded focus to serving our clients. Lockton takes a long-term view on its investments. We look forward to a long partnership with the Chinese insurance and risk management community."

Lockton Greater China Managing Director Greg McCoy said: "We are delighted at the opportunity to expand our existing Asia region business to include the new China operations. The Shanghai office will serve as a platform for substantial growth and further investment in the exciting China market place."

(BUSINESS WIRE)

People’s Bank of China buys stake in the Pru

China’s central bank has built a £130m ($241m) stake in Prudential, the UK’s second biggest life assurer, in a further example of the deployment of sovereign wealth by the Asian economic giant.

The 1 per cent stake puts the People’s Bank of China among the Pru’s top 25 institutional investors, although the stake is seen as a long-term holding rather than a step towards a takeover bid.

(FT)

HSBC Plans to Have 100 Outlets in China by 2009

Aug. 19 -- HSBC Holdings Plc, Europe's largest bank, plans to have 100 outlets on the mainland by 2009, expanding in the world's fastest-growing major economy even as it expects bad loans to rise in Asia.

The bank will have 80 outlets in China at the end of this year, compared with the current 70, Margaret Leung, global co- head of commercial banking, said in a Hong Kong briefing today.

HSBC is betting on growth from China, where it competes with overseas banks including Citigroup Inc. and Bank of East Asia Ltd., even as it expects loan impairment charges in Asia-Pacific to increase as a U.S. slowdown affects the region. Asia contributed 65 percent of pretax profit in the first half after losses in North America, the London-based bank said Aug. 4.

Pretax income from China's commercial banking business grew 79 percent in the first half to $300 million, Leung said today, adding that the country, together with the United Arab Emirates and India, are the ``best areas'' of growth.

HSBC, founded in Hong Kong and Shanghai in 1865 to finance growing trade between Europe, India and China, reported the steepest earnings drop since 2001 earlier this month on record U.S. subprime mortgage defaults and said profit growth from emerging markets will fall.

Shares in HSBC fell 1.8 percent to HK$122.20 today, and are down 7.2 percent this year compared with a 26 percent plunge for the benchmark Hang Seng Index.

Bad Loans

``Impairment charges in Asia will keep rising because in 2007, the credit situation was too good to be true,'' Leung said. ``I don't believe there is a 100 percent decoupling'' of Asia from the developed countries, she said.

Loan impairment charges in Asia-Pacific rose 16 percent to $450 million in the first half from the same period last year, HSBC's report showed earlier this month. The increase was due primarily to higher lending growth in the Middle East and India, the bank said.

During the first half, HSBC announced plans to acquire 73.2 percent of Indian brokerage IL&FS Investsmart Ltd. for 10.03 billion rupees ($237 million), and is in talks to buy Lone Star Funds' 51 percent stake in Korea Exchange Bank for $6.02 billion.

Of the $4.6 billion in pretax income posted by the commercial banking division globally in the first half, emerging markets contributed 54 percent, Leung said.

HSBC will focus its resources on hiring ``in the high-growth areas'' such as China and India in the current half year, while maintaining the headcount at its Hong Kong commercial banking operations at more than 2,000, she added.

The bank is expanding in second-tier cities in India, where pretax income from commercial banking rose 53 percent in the first half, she said.

Emerging markets will ``hold up reasonably well, albeit with less momentum, than in the recent past,'' Chairman Stephen Green said earlier this month.

(Bloomberg)

BBVA eyes expansion in China,India,Brazil

MADRID, June 15 - BBVA is looking for medium- to long-term opportunities to expand its foothold in markets in China, India and Brazil, the Spanish bank's chairman said in a newspaper interview.

Spain's second-largest lender has expanded aggressively in recent years to reduce its dependence on Spain, where economic growth is slowing sharply.

Earlier this month, BBVA doubled its stake in mainland China's seventh largest bank CITIC to 10 percent and took an option to buy another 5 percent in the next two years.

"In India or China, you have to think long-term, not in getting there and making money tomorrow," Francisco Gonzalez told El Pais.

"If China develops properly, and I think it will, we will have an excellent opportunity to do good business in China, but that will be in the next 10 to 15 years," he added.

Gonzalez said he was keen to expand BBVA's presence in India, where it currently has one branch.

"Today it is not easy to enter (India) due to restrictions on foreign investment, but there will be a new government in 2009 and perhaps new opportunities," he said.

BBVA expected to return sooner or later to the Brazilian market, where it sold its 5 percent stake in Bradesco last year.

"Of course Brazil is a big country and we have an excellent global banking operation there, so if an opportunity arises, we will take advantage of it," he said.

(Reuters)

Asia saves the day amid banks slowdown

Record mergers and acquisitions activity by Chinese and Indian companies has helped investment banks’ Asian operations weather the credit crunch better than their US and European counterparts this year.

Investment banks have pocketed an estimated $4.3bn in fees in Asia-Pacific in the first five months of the year, according to Thomson Reuters. The region is on course to deliver its second most lucrative year on record.

While the figure is down 12 per cent on the period last year, investment banking revenues fell 38 per cent to $16bn in the Americas and 46 per cent to $9.4bn in Europe.

The data include fees earned from M&A, equity and debt capital markets and loans in Asia- Pacific excluding Japan. Fees earned from derivatives and trading are not included.

Revenues from equity capital markets in Asia-Pacific dropped 44 per cent to $1bn after the collapse in initial public offerings. But overall figures were boosted by an 11 per cent rise in revenues from M&A to $2.9bn.

There has been a steady flow of multibillion-dollar M&A deals in the region this year, including: the planned $18bn takeover of St George Bank by Westpac, its Australian rival; Tata Motors’ $2.3bn purchase of Land Rover and Jaguar marques; and unprecedented outbound Chinese investment in resources.

Investment banks’ revenues in the US and Europe have been dented by their disproportionate reliance on fees generated by M&A activity from private equity groups, which has dried up.

Matthew Hanning, head of M&A in Asia-Pacific for UBS, said: “Asia has not been as affected as the US and Europe by the downturn in the credit markets. M&A activity is being driven by the region’s strong economic fundamentals.”

Strategic buyers in countries such as China and India remain eager to build global scale.

Several very large deals involving Asian strategic buyers could materialise this year. Huawei Technologies, the Chinese telecoms network provider, is selling a stake in its mobile devices unit. India’s Reliance Communications is in merger talks with MTN, the South African mobile phone company.

Global investment banks are preparing for another increase in M&A activity by relocating star performers in New York and London to Asia.

(FT)