HSBC has 3-year head start on foreign investment banking rivals in China

[HSBC] has a three-year lead over its foreign investment bank rivals in China because of the British bank's unique position of having control over the management of its securities, said Thursday the General Manager Stuart Gulliver.

Gulliver's comments come after Beijing, in a surprise move last month, announced that it would allow foreigners to control their operations on land. Currently, non-Chinese groups are limited to 49% of interests in joint ventures in a fast-growing market.

HSBC's control of 51% of HSBC Qianhai Securities is unique in that it has been able to use its long-established Hong Kong subsidiary to take advantage of a rule favoring city-based banks.

Many international banks are eager to launch Chinese majority-owned companies or strengthen their holdings in existing partnerships to integrate these operations into their global networks and better manage reputational risk, according to bankers.

According to the CEO of HSBC, it will still be years before majority foreign-owned companies set up.

"The settlements will come in two years, then you have to choose your partner and you have to hire people – we think we have a lengthy three year lead," Gulliver said at the time. a scrum during the launch of its securities joint venture in Shenzhen.

The joint venture, with Qianhai Financial Holding Company, a local government-controlled investment unit, is part of the UK bank's "pivot to Asia" strategy launched in 2015 to capitalize on its close ties in the region and the proximity of the Pearl River region of China speaking Chinese to the HSBC stronghold in Hong Kong.

The company's license allows HSBC to secure bond and equity sales on the mainland and to act as a broker for shares listed in Shanghai and Hong Kong. Shenzhen. He can also publish research on Chinese companies to local customers. Up to now, nearly 100 employees have been hired, investment bankers constituting the largest group.

Asia accounted for 70% of HSBC's pre-tax adjusted earnings in the first nine months of the year. Gulliver said Thursday that he expected the Pearl River Delta business, which includes personal and commercial banking, to generate a cumulative pre-tax profit of $ 1 billion over the same period. next three to five years and $ 500 million a year. after that.

The bank already has about 17,400 employees in the region, including 15,000 in data processing and software. About 2,400 are in his branches – a number he expects to double by 2020.

Gulliver must resign as CEO in 2018 after seven years at the helm. He will be replaced by John Flint, who currently heads the bank's retail and wealth management division.

The CEO welcomed the announcement that Ping An had become the second largest shareholder of HSBC. The Chinese insurer began buying shares in 2016 as part of its investment in insurance and surpassed Wednesday's threshold of 5 percent, after which it had to announce its participation.

"We are really very happy about that," said Mr. Gulliver, adding that he and other senior executives regularly met with Ping An executives as they did it with deputy. other major shareholders.

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