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HSBC confirms 19.9% stake in Chinese bank
(Agencies)
Updated: 2004-08-03 10:51

Global banking giant HSBC Holdings announced a 53-percent surge in interim earnings, beating analysts expectations, and confirmed plans for a major push into China's banking industry.

The bank, headquartered in London and now with extensive business interests across the globe, said it had reached agreement on taking a 19.9-percent stake in Bank of Communications, the fifth ranked state bank in China.

HSBC shares meanwhile headed the leaderboard near the close of trading in London, jumping 3.22 percent to 833.5 pence.

The FTSE index of 100 leading London shares edged up 0.05 percent at 4,415.40 points.

HSBC recorded a 53-percent rise in pretax profit to 9.37 billion dollars (7.79 billion euros) in the six months to June compared with the same period in 2003.

The earnings smashed analysts' expectations of a 30-percent gain, while HSBC's key US consumer finance acquisition, Household International, contributed 1.90 billion dollars to pretax profit.

Operating profit before provisions rose 41 percent to 11.80 billion dollars and net profit grew 55 percent to 6.35 billion dollars.

The charge for bad and doubtful debts rose 429 million dollars to 2.80 billion dollars, which included an additional charge against Household International of 1.29 billion dollars.

"Offsetting this, there were substantially fewer large specific provisions required in the corporate sector and the improving economic environment and outlook in both the United States and Hong Kong generated lower requirements for both specific and general provisions," the bank said.

Group chairman John Bond said the interim results were the best ever by the bank.

He added that HSBC remained committed to grow organically rather than through acquisitions.

Bond told a press conference in Hong Kong that "the current operating environment remains favourable" with improving economic conditions in its major markets, particularly in the United States and Hong Kong.

Regarding the group's talks with the Bank of Communications, he said: "Those discussions have gone well and are at a very advanced stage. We have reached agreement in principle on the terms of our investment."

He said an announcement would be made shortly on terms of the deal. Although Bond declined to be drawn on further details or the amount of the agreement, reports have put the figure at around US$2 billion.

Bond meanwhile said that China would play an important role in the bank's long-term strategy.

"We have long-term confidence in China and our wishes are to contribute further to China's banking infrastructure...There's still room for HSBC to open branches in all major cities and China remains very important in our world's long-term strategy," he said.

Speaking at the same press conference David Eldon, chairman of HSBC unit Hongkong and Shanghai Banking Corp. noted:

"The outlook for Hong Kong is generally positive ... the slowdown in China may have an impact in Hong Kong but we have seen momentum underway in Hong Kong which will give us confidence."

Bond noted in a statement that at the start of the six months there had been key questions on the outlook for interest rates, the US and Chinese economies, the weight of consumer debt and the possible impact of international terrorism.

"The global imbalances which brought about such uncertainties remain," he said, adding:

"It would be unwise to relax, particularly when the last 18 months have seen a significant build-up of capital reserves within the financial services industry and while capital investment in the West has remained muted."

Reflecting the bank's successful diversification away from its base in Hong Kong, HSBC said that in the first six months, North America accounted for 33.9 percent of its business, Europe 29.8 percent and Hong Kong 25.2 percent with the rest of Asia adding a further 9.5 percent.



 
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