HONG KONG: HSBC is planning to increase its branches by up to 20 on the mainland next year as the bank continues its effort to carve out its share of the success of the world's third largest economy.

"We will be the largest international bank in China. We will continue to invest in China in 2010," Sandy Flockhart, chief executive of HSBC was quoted by media as saying in Taipei yesterday.

The bank aims to increase the number of its branches on the mainland by 15 to 20 next year, and to have 100 branches by the end of 2009.

But a spokeswoman from HSBC said the plan has not been confirmed yet.

The Hong Kong-listed bank has been increasing its efforts to expand its presence and operation on the mainland amid a slowdown in its major markets Europe and US. But banking analysts warned overseas banks' development in the region may not be as fast as the market expects.

"They (overseas banks) are all very ambitious, but their growth will be slow," said Tony Tong, a senior banking analyst at China Everbright Research Ltd.

The most efficient expansion practice would be merger and acquisition, Tong explained, but China Banking Regulatory Commission (CBRC) allows overseas banks to own only less than 20 percent stakes in mainland banks.

As for the number of new branches, he suggested that 20 branches a year is a reasonable target: "20 branches in a year is not a lot for a giant like HSBC," Tong said. With respect to ownership, he said, "The 20 percent quota has been set for over ten years and I don't see any sign of lifting."

HSBC bought 19.9 percent of Bank of Communications (BoCom), China's fifth largest bank, in 2004, for $1.75 billion. It also has a 16.8 percent stake in Ping An Insurance.

The London-based bank announced last month it was shifting its power base back to Hong Kong, the lender's original headquarter city when it was established 144 years ago. In a move to signal the lender's strategic redeployment, the bank has announced it will relocate its chief executive Michael Geoghegan from London to Hong Kong.

Known in the industry as "the big elephant", HSBC could generate 60 percent of its profits from Asia in the coming ten years, analysts say.

To further embed its footprint in the fast growing economy, HSBC is preparing to list on the Shanghai stock market in a bid to draw in local investors and further raise its profile.

Executives at the bank said that the initial public offering in Shanghai depended on mainland regulatory requirements and that there is no specific time frame yet.

HSBC could raise 50 billion yuan in a Shanghai listing next year as it tries to become one of the first foreign companies to list on the mainland. The bank has hired China International Capital Corp (CICC) and Citic Securities Co to organize the Shanghai share sale, sources familiar with the deal said.

(HK Edition 11/03/2009 page4)