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HSBC is going to strengthen its cooperation with the Bank of Communications (BoCom) as its long-term strategic focus in China, with no intention of buying stakes from other commercial banks anymore, a top manager of HSBC told China Daily.
"We are striving to make our cooperation with BoCom as a paragon for other joint efforts," said Wang Dongsheng, executive director of HSBC.
According to BoCom's announcement on Tuesday, Wang is to become the non-executive director of BoCom, a move to further their integration.
For the moment, HSBC has a 19.9 percent stake of BoCom, near the regulation's cap from the China Banking Regulatory Commission (CBRC), the industry watchdog.
In 2003, the CBRC raised the limit from 15 percent to 20 percent for the stake a single foreign investor can hold in a domestic bank. It increased the limit further to 25 percent for two foreign shareholders.
"If the policy further loosens, we will increase our stake in BoCom to around 40 percent, a more rational figure," said Wang.
He stressed that lifting the stake does not imply that HSBC wants to have more control over BoCom. "We just need a more rational balance between profits and risks," Wang added.
If HSBC raised the stake to 25 or 30 percent, we will face more risks but cannot enjoy corresponding returns, Wang explained.
"Besides, if our stake climbs to 40 percent, HSBC can be a platform for BoCom to go international," said Wang.
Currently, HSBC also has an 8 percent stake of the Bank of Shanghai and joins hands with Ping An Insurance Company of China.
"HSBC's expansion in China follows every step of the nation's efforts to open its financial market," said Wang. "And we hope to have more communication with the industry watchdog so that we can have a clearer idea about what we can do next."
He said there would be no over-heated competition between HSBC and BoCom. "The potential market is so huge that every player can get a slice of market shares."
The core competitiveness of HSBC, Wang stressed, lies with the service and products rather than how many outlets it has.
As BoCom will soon be involved in the mainland's insurance business through its wholly-owned insurance subsidiary registered in Hong Kong, HSBC is also considering tapping into China's burgeoning insurance market.
China Communications Insurance Co Ltd (CCIC), a property and casualty insurer solely invested by China's fifth-largest commercial bank in 2000 with a registered capital of HK$100 million (US$12.8 million), has entered advanced negotiations with some mainland partners, and may soon submit an application to the China Insurance Regulatory Commission, according to a report in Shanghai-based China Business News.
"We will give Ping An our full support in boosting insurance business, but we haven't got any detailed plans for the moment," Wang added. "The bank can leverage its wide network of branches for the insurance business."
After reaching a strategic cooperation agreement with Ping An Insurance, HSBC Shanghai branch got the green light from the industry watchdog to launch the insurance agent business from August 1, selling Ping An's major products.
Meanwhile, the Guangzhou, Beijing and Shenzhen branches of HSBC also got the approval and are expected to run this business in September.
"We will also consider selling other insurers' products if their target customer or type of products are different from those of Ping An," Wang added.
As a veteran in the banking business, Wang Dongsheng has worked in Citibank and Standard Chartered Bank before entering HSBC.
(China Daily August 25, 2005)
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