Bullish HSBC set to spend £2bn more

City failed to notice bank's £660m French windfall
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The Independent Online

HSBC Holdings will be able to recoup a tenth of the £6.6bn it is spending on Credit Commercial de France by mopping up the French bank's excess capital. The 1bn euro (£660m) windfall has gone unnoticed by the City, which has largely criticised the London-based global bank for overpaying for the French retail bank in the deal announced last weekend.

But HSBC has found CCF has 1bn euro more capital than its needs to comply with the regulatory minimum. As HSBC itself has more than ample capital it can immediately use the money to fund other deals.

Sir John Bond, chairman of HSBC, told The Independent on Sunday that the bank is currently looking at two more deals that could lead to it spending up to £2bn to add to the £16bn HSBC has spent in recent months on the purchase of CCF and the two banks run by the late Edmund Safra, Republic and Safra.

HSBC is to lodge a bid in the auction for Banco Serfin, Mexico's third largest bank, which is to be sold next month by the Mexican government.

HSBC already has a 20 per cent stake in Serfin, though it is facing tough competition, not least from Banco Santander, the Spanish group that is the largest shareholder in Royal Bank of Scotland.

Analysts expect the bidding to top $1bn (£630m).

Sir John also said that HSBC is in talks to take over one of the largest banks in Thailand - Bangkok Metropolitan. This Thai bank has been hit hard by the fall in property prices that followed the Asian crisis two years ago. However, it is expected to cost HSBC as much a £1bn.

The two deals come as part of a two-prong strategy that has seen HSBC develop banking services for wealthy individuals and business in developed countries, while in emerging markets it is trying to build a more broadly-based operation.

"We start from a backdrop that half of HSBC's present operations are in OECD countries and half are in emerging economies," said Sir John. "In the OECD there is fairly full participation in the banking system so we can concentrate on what is termed - and it's not a phrase I favour - 'wealth creation'. In the emerging market world you have banking systems that are lightly used - only 20 per cent of people in Argentina have a bank account - so there is an attraction in developing these markets."

The purchase of CCF dovetails with last autumn's acquisition of the Safra bank. Safra is a private bank whose clients have an average wealth of £1m while CCF is an upmarket operation with a large presence in both metropolitan Paris and the Cÿte d'Azure. "We can make an economic profit out of CCF in the first year," said Sir John. "It will prove to have been purchased at an extremely attractive price."

Sir John has effectively ruled out any bids for banks in the United Kingdom. Its operations, the former Midland Bank, stand at fourth place behind Lloyds TSB, RBoS/NatWest and Barclays.

But HSBC sees any growth in the UK market as coming from its telephone and internet bank, First Direct. Sir John also suggests that all the cutbacks and branch closures, that have led to such a furore at Barclays this week, were a foolish strategy. Indeed, HSBC proudly points out that more people work in the old Midland businesses now than when HSBC bought the bank.

"In a service business it is very hard to provide good service to customers if the dark spectre of unemployment is hanging over the staff's head," Sir John argued.

The HSBC chairman also said the bank would not become embroiled in the row over Dresdner Bank, that last week called off its merger with its larger rival, Deutsche. He said that if German banks can't make money out of the country's retail customers, what chance do foreigners have.