Outlook: Bond goes shopping for some US glitz

LAST AUTUMN Deutsche Bank splashed out $10bn to buy Bankers Trust. Yesterday HSBC went on its own American shopping trip with a little more than $10bn and came back with Edmond Safra's Republic Bank of New York. Both banks came on the market at least partly as a consequence of last autumn's Russian bond debacle.

But there the similarities end. HSBC is a quality operation, and though Mr Safra is no stranger to controversy, so is Republic Bank. Their get together at least has the merit of not being obviously against the interests of HSBC's shareholders. The same cannot be said of Deutsche's takeover of Bankers Trust.

Even so, by the staid standards of HSBC, Republic is a racy purchase. HSBC usually only buys banks that are flat on their back and going for a song. In this case it is paying a generous two and a half times book value. It is also paying with its own stock. Hence the 2.5 per cent drop in HSBC's shares yesterday.

Banks are expensive things these days, and a bank like Republic, with its hugely wealthy clientele, comes even more expensive than most. Banks like Republic simply don't sell at distress prices.

All the same, HSBC is already an exceedingly large bank, so large that outsiders find it hard to tell what is going on inside. This is not going to make the task any easier.

If HSBC delivers on the promised cost savings - and knowing his finance director, the aptly named Douglas Flint, yesterday's estimate of $300m a year will have erred on the side of conservatism - the purchase should end up paying for itself. But the impression remains that the real reason for this deal was because it was there and available.

John Bond, the chairman, is keen to escape from the long shadow of his charismatic predecessor, Sir Willie Purves, and he has made no secret of his desire to strike out in a different direction. He's going to have an uphill struggle convincing the City that the acquisition of Republic amounts to much more than that.

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