HONG KONG, KOMPAS.com - HSBC Holdings PLC's (HBC) move to prioritize growth in several key Asian markets, including China and India, helped the lender post stronger earnings growth in the region last year beyond Hong Kong, which previously was its biggest profit generator, a senior executive said Monday.
Combined pretax profits for the bank's Asia-Pacific business outside of Hong Kong overtook the city for the first time ever in 2010, said Peter Wong, chief executive of HSBC's Asian arm, underscoring the banking giant's efforts to affirm its position as a pan-Asian lender.
“This is an historic moment,“ Wong told Dow Jones Newswires in an interview. The change is part of the bank's “plans to balance our portfolio.“
HSBC, which was founded in Hong Kong in 1865 and moved its headquarters to London in 1992, has retained significant presence in the former British colony, though it has is in recent years boosted investments overseas, particularly in emerging markets in Asia and Latin America.
HSBC in Asia earlier set six “prioritized markets“ outside of Hong Kong with which to focus on higher growth. These markets are: Malaysia, Indonesia, Singapore, China, India and Australia. In particular, China and India were the fastest-growing markets in 2010, registering pretax profit growth of 94% and 82%, respectively.
Pretax profits for the region excluding Hong Kong jumped 41% in 2010 to US$5.90 billion from US$4.20 billion a year earlier. By comparison, pretax profits in Hong Kong last year rose just 13% to US$5.69 billion from US$5.03 billion.
The U.K.-based lender reported earlier Monday its net profit for the last fiscal year ended Dec. 31 more than doubled to US$13.2 billion from US$5.83 billion, driven by a sharp fall in bad loans with emerging markets continuing to drive earnings growth.
Wong said the strength of the Asian economies will continue to underpin growth for the bank this year, but mergers and acquisitions aren't a priority.
“As far as acquisitions are concerned, they would be more opportunistic in a sense that if something comes along, and the price is right, and has synergy with the organization, we'll look at it. But we will not actively go out and do acquisitions,“ said Wong.
Last July, the lender entered a deal to buy the Indian retail and commercial banking operations of Royal Bank of Scotland PLC. However, Wong said Monday that the deal is still pending regulatory approval in India, but he didn't elaborate.
For this year, the executive said the lender expects to benefit from a rise in interest rates in the Asia-Pacific region due to strong inflationary pressures, particularly in China.
Banks usually benefit from rate hikes as the rise in funding costs are usually slower than the rise in lending repayments, given that lenders hold more demand deposits that carry low rates, according to analysts. China raised interest rates three times since October last year, in a bid to rein in rising inflationary pressure in the country amid surging asset prices.
In the past decade, HSBC has invested more than US$5 billion in mainland China, including CNY8 billion worth of registered capital in HSBC China; a 19% stake in Bank of Communications Co. (3328.HK), China's fifth-largest lender by assets; a 16.7% holding in Ping An Insurance (Group) Co. of China Ltd. (2318.HK); and an 8% interest in Bank of Shanghai Co.
The banking giant's business in China has undergone rapid expansion over the last several years. It now has around 100 outlets across two-dozen cities, compared with fewer than 30 outlets in mid-2006, a year before China fully opened its banking industry to overseas competition.
Wong said the bank will continue to open more branches in China. “We will open branches as quickly as we can get them approved,“ said the executive.
He said the lender also continues to be in talks with a number of mainland parties on a securities brokerage joint venture in China. Late last year, U.S. investment banks JPMorgan and Morgan Stanley already received state approval to set up their respective securities ventures in the nation.
“We're not in that much of a hurry,“ said Wong.
