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)