HSBC's Indonesia, Shanghai moves beef up Asia presence
Updated: 2009-08-15 08:12
(HK Edition)
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Global banking giant HSBC is making moves to gain greater traction in the region from which it sprang 144 years ago: Asia.
On Thursday, Europe's largest lender completed a mandatory tender offer for the acquisition of Indonesia's PT Bank Ekonomi Raharja by purchasing an additional 10.08 percent stake in the bank. HSBC now has a 98.96 percent ownership stake in the Indonesian bank.
The acquisition comes in the wake of a dramatic decline in HSBC's global income. HSBC's net income declined to $3.35 billion from $7.72 billion in the first half, with Asia accounting for 52 percent of earnings and provisions for bad loans amounting to $13.9 billion.
HSBC said that it has bought 269.01 million shares of the publicly-owned Indonesian bank for $72 million. "The acquisition almost doubled HSBC's presence, expanding it to 208 outlets in 26 cities in the world's fourth most populous country," HSBC said in the statement.
The move complements its highly publicized proposed Shanghai IPO, a deal designed not to raise funds as much as to promote the HSBC brand-name.
"For a global bank such as HSBC, selling shares locally would boost its brand awareness and help it diversify risks," said Fan Kunxiang, analyst at Haitong Securities Co. "I don't think raising some money would be the main purpose for HSBC."
The bank doesn't need the money, but it would bring billions in Chinese yuan for local operations and lending. Moreover, once it attracts millions of enthusiastic stock investors as shareholders, it could gradually transfer them into the bank's customers.
On the mainland, where it employs 5,500 people, HSBC now has 89 outlets and offices in 20 cities - the largest network of any foreign bank. It holds 19 per cent of the Bank of Communications, 16.8 per cent of Ping An Insurance and 8 per cent of the Bank of Shanghai. In June it sold 1 billion yuan of renminbi-denominated bonds in Hong Kong - the first foreign bank in the city to do so.
HSBC is also known to be on the hunt for joint-venture partners to tap the mainland's vast and rapidly growing insurance and securities markets. But the cap on its return to China's mainland would be a listing on the Shanghai stock exchange.
Yi Xianrong, an analyst at the Chinese Academy of Social Sciences, believes a HSBC listing would constitute a step forward in the nation's financial system reform. "It would be a significant move forwards internationalization."
In an effort to deregulate the country's capital market, relevant authorities in May agreed to let qualified foreign companies list on its stock exchanges by issuing shares or depository receipts.
(HK Edition 08/15/2009 page2)