HSBC Faces Tough Issues in China
The chairman of HSBC Holdings PLC indicated that tough issues remain to be resolved before his bank can buy a stake in China's fifth biggest bank and that success isn't a sure thing.
David Eldon said that if the deal went ahead, the U.K.-based lender probably wouldn't be interested in buying into any of China's Big Four state banks.
Mr. Eldon said one or two negotiating deadlines with Bank of Communications had already been extended. HSBC, he added, is determined to leave "no reason for ambiguity" before putting its reputation on the line by signing a contract for a 19.9% stake in the Shanghai-based bank in what would be the biggest deal of its kind in China.
Tough Choices
"Nobody wants to drag these things out forever," Mr. Eldon said. If it seemed like a deal wasn't within reach, HSBC might have to say "look, the time for talking is finished and we'll just have to go our own ways." But he added: "We're not negotiating to do that."
Mr. Eldon declined to put a value on the deal. Chinese media reports say it could be up to US$2 billion.
His comments highlighted tough choices faced by foreign financial institutions in China. Beijing is anxious to attract foreign strategic investors in its banks, including the Big Four, before the nation's market opens fully to global competition in 2007. Yet Chinese banks have weak internal controls and are laden with bad debt. The larger the investment, the bigger the risk.
Mr. Eldon suggested that HSBC would have no appetite for bigger acquisitions if the Bank of Communications deal went ahead. In that event, he said, "we'd have to consider whether or not it would be appropriate to take a stake in anything else. Probably not."
"If there are other transactions that are outside the commercial bank arena [in China], then they may be of interest to us, but at this point as far as banking goes we have enough," he said.
Range of Issues
A stake in Bank of Communications would give HSBC access to a nationwide network of branches and ATMs through which it could pump its own retail products. And it likely would secure a larger voice in management decisions in the Shanghai bank than would be possible in any of the Big Four.
Mr. Eldon said negotiations covered a whole range of issues, not just price. Bank of Communications has plans to list this year on the Shanghai stock exchange, and possibly in Hong Kong and New York as well. The Bank of China and China Construction Bank -- two of the four state behemoths -- also are seeking foreign partners ahead of planned stock-market listings.
When asked about recent revelations by China's National Audit Office over a case of deliberate loan misclassification at a Bank of Communications branch office, Mr. Eldon said: "We do our due diligence. As long as we are satisfied at the end of the day that will be good enough for us."
Last week, the audit office said it found evidence the branch and local courts in northeastern Liaoning province had colluded in falsely classifying 221 million yuan (US$26.7 million) loans as nonperforming.
China allows single foreign banks to own as much as 20% of a Chinese bank. Total foreign ownership can't exceed 25%. HSBC already owns an 8% stake in Bank of Shanghai in China.
Possible Investment
Mr. Eldon also said HSBC would be interested in raising its holding in China's second-largest life insurer, Ping An Insurance Co.
"There are no specific plans to do so, but I would think we'd be interested," Mr. Eldon said. He noted HSBC already holds about a 10% stake in the Chinese insurer and when asked about a time frame to increase its stake, he said: "Let's say in the reasonably short term." He stressed that no formal discussions have begun.
Ping An Insurance listed shares for the first time last week on the Hong Kong stock exchange's main board. Shenzhen-based Ping An, also China's third-largest property and casualty insurer, raised HK$14.3 billion (US$1.83 billion) from its initial public offering earlier this month.
HSBC became Ping An's largest shareholder after the listing with a 9.99% stake.
汇丰银行在中国面临棘手问题
香港上海汇丰银行有限公司(Hongkong and Shanghai Banking Corp., 简称：汇丰银行)主席艾尔敦(David Eldon)表示，在收购中国第五大银行的股份之前，仍需解决一些难题，他无法保证一定会取得成功。
艾尔敦说，如果此项交易进展顺利，汇丰银行可能不会再有兴趣收购中国4大国有银行的股份。
艾尔敦说，与交通银行(Bank of Communications)谈判的最后期限已经延长了一、两次。他说，汇丰银行不想在签署收购交通银行19.9%的股份前，还留下任何模糊不清的问题。如果获得成功，这可能是中国迄今最大一项收购银行股份的交易。
艾尔敦说，没有人想无休止地拖延下去。如果交易难以达成，汇丰银行就会在最后期限到达后结束谈判，独自采取其他措施。但他也说，目前作此断言还为时尚早。
艾尔敦拒绝透露此项交易的总值。中国媒体报导称，交易额可能高达20亿美元。
艾尔敦的言论凸显了海外金融机构进入中国时所面临的艰难选择。中国将在2007年对全球竞争者完全开放其银行市场，中国政府急于在此之前为包括四大国有银行在内的各家银行吸引到外国战略投资者。但中国各银行的内部控制薄弱，不良贷款居高不下。银行的投资越大，风险就越高。
艾尔敦表示，如果与交通银行的交易进展顺利，汇丰银行可能将不会在中国银行业展开更大规模的收购。他说，在这种情况下，公司将会考虑再收购其他银行的股份是否合适。答案很可能是否定的。
他说，就中国而言，如果商业银行领域之外存在收购机会，汇丰银行可能会乐于尝试，但就银行业而言，已经足够了。
持有交通银行的股份将使汇丰银行得以进入后者遍及全国的分行网络和ATM机，藉此可以推出自己的零售产品。而且相较于持有某家四大国有银行的股份，汇丰银行能在其持股的交通银行享有更大决策权。
艾尔敦称，谈判不但涉及了价格，还涉及了方方面面的问题。交通银行计划今年在上海证交所上市，并可能也在香港和纽约证交所上市。中国银行(Bank of China)和中国建设银行(China Construction Bank)也计划上市，并希望在此之前找到国外的合作伙伴。
在问及中国审计署(China National Audit Office)近期揭露的交通银行一家分行编造虚假贷款核销手续的问题时，艾尔敦说，汇丰银行进行自己的尽职调查。只要公司在每天都感到满意，这就够了。
国家审计署上周称，发现交通银行在中国东北辽宁省的一家分行与当地法院勾结，伪造手续，将人民币2.21亿元（2,670万美元）的贷款划为不良贷款。
中国规定国内银行最多只能将25%的股份出售给外资，而单个外资银行的持股比例不能超过20%。汇丰银行已经持有上海银行(Bank of Shanghai)8%的股份。
艾尔敦还表示，汇丰银行对增持中国第二大人寿保险公司中国平安保险(集团)股份有限公司(Ping An Insurance (Group) Co. of China Ltd., 2318.HK)的股份感兴趣。
艾尔敦说，还没有具体的实施计划，但汇丰银行对此感兴趣。他指出，汇丰银行已经持有平安保险大约10%的股份，当被问到何时会增持股份时，他说，大概会在比较短的时间内完成。他强调，还没有就此事展开正式讨论。
平安保险上周在香港联交所主板上市。该公司从本月初的首次公开募股中筹集了143亿港元（18.3亿美元）的资金。平安保险还是中国第三大财产及意外险保险商。
平安保险上市后，汇丰银行持有其9.99%的股份，是该公司的最大股东。
