China Crisis Highlights: HSBC and Citi
The fourth China Huijin holding is the Agricultural Bank of China, with RMB 7.2 trillion in assets but is much a mix of CCB, BoC and ICBC, with 16000+ branches and 300K employees.
However, we are going to discuss the 8000-10000 branch strong HSBC and Citigroup where Foreign owned banks are still 2 times the size of City Commercial Banks that form the third tier of Banking in China. These smaller city commercial banks are useful as investment vehicles for entry into China. A foreign bank is allowed to conduct business with a Net worth of RMB 600m of which RMB 200mn is required in freely convertible currency and the other 400 mn in local RMB HSBC has a long history in China with its Shanghai branch opening in 1865
HSBC is one of the more established banks in Mainland China with 8% in the Bank of Shanghai and 19.9% in the Bank of Communications, joint stock banks that are required by CBRC and PBOC regulation to maintain RMB 1000 mn or USD 150 million as Capital. Apart from HSBC’s own 60+ branches across 20 city clusters, BoCom adds 2800 branches in 80 cities. No information was available on Bank of Shanghai. Together the two joint sock commercial banks hold a RMB 1 Trillion in Assets. HSBC also owns 16.9% in the renowned Ping An Life Insurance
Citi established operations as the first American bank in 1902. It operates 30+ branches, and significantly pushes its knowledge of China internationally and in China would have like to push its knowledge of the securities business.
HSBC and other foreign banks together account for a 2.3% market share in China in assets and 10 bp lower in liabilities business. Out of the $150bn in assets and $140 bn in liabilities, locally incorporated foreign banks like Citi and HSBC account for more than half or $90bn and $80 bn respectively. Foreign banks in India hold around $300bn in assets and similarly in liabilities among the Top 5 for a 7% market share.
HSBC also owns a Rural bank in Suzhou Chengdu, and 12.8% H Shares of Industrial Bank. CEO Stephen Green has recently moved his HQ to Hong Kong to collect his larger 2010 bonus and focus on the emerging markets in Asia, China and India.
HSBC plans adding 10-15 branches in addition to 90+ by end 2010 and additional M&A as it readies for a first IPO in Shanghai/Hang Seng. China earned HSBC a NPAT of $752 mn, a sixth of its global $5bn in six months 2009 profit. HSBC is still waiting for new CBRC regulation and approvals for its $7.3 billion IPO.
Citi would likely have reported business profits of $300mn from China in the same six months
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