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Hang Seng Bank's strategic investment in Industrial Bank is part of its long-term business focus in the country - and it has currently no intention of buying stakes in other commercial banks, a top manager of the Hong Kong-based lender told China Daily yesterday.
"We are single-minded on Industrial Bank," said Raymond C. F. Or, vice-chairman and chief executive of Hang Seng Bank. "But if there are good business opportunities, we will consider investment in the mainland's insurance, securities and asset-management sectors."
Hang Seng and parent company HSBC Holdings are considering setting up a joint-venture insurance company on the mainland by the end of this year, but Or declined to disclose any information on their Chinese partner.
Hang Seng acquired 15.98 percent of Fujian-based Industrial Bank's enlarged capital for 1.73 billion yuan (US$213.6 million) last year. As Singapore GIC and the International Financial Corporation (IFC) hold 5 percent and 4 percent, respectively, of Industrial Bank, the three foreign investors account for 24.98 percent, very near the cap that the industry watchdog allows.
In 2003, the China Banking Regulatory Commission (CBRC) raised the limit from 15 percent to 20 percent for the stake a single foreign investor can hold in a domestic bank; and increased the limit to 25 percent for all foreign shareholders.
"If the industry watchdog further raises the limit, we will raise our stake in Industrial Bank," added Or.
He said Hang Seng and Industrial Bank are collaborating well, especially in the credit-card business and wealth management services.
Industrial Bank launched its first international dual-currency credit card bearing the Hang Seng logo last year and set up a credit-card centre.
According to Or, China's credit card business has a huge potential. At the end of June, over 160 domestic institutions had issued 875 million bank cards, but around 800 million of them are debit cards.
"If 10 percent of the bank cards are credit cards, lenders' profit margins will be greatly boosted," said Or.
But he doesn't think that foreign investors will launch their own credit cards in China. "Without a wide branch or customer network on the mainland, foreign investors can hardly benefit from this business. And that's why they chose to join hands with domestic lenders."
Even as it strengthens its co-operation with Industrial Bank, Hang Seng is also striving to boost its own presence in China.
The bank upgraded its Beijing representative office to a branch company yesterday after a wait of seven years.
As the Beijing branch hasn't yet got the license to conduct renminbi business, it will mainly focus on foreign currency business and target foreign enterprises and customers.
Hang Seng has 12 outlets on the mainland - six branches, four sub-branches and two representative offices. It plans to change its Dongguan representative office in South China's Guangdong Province to a branch company.
As a regional bank, Hang Seng will concentrate its business in the Pearl River and Yangtze River deltas, he said.
The State Administration of Foreign Exchange on Monday raised Hang Seng's qualified foreign institutional investor (QFII) quota by US$50 million after it used up the initial allocation of US$50 million.
(China Daily September 7, 2005)
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