Is HSBC playing catch up to Citigroup and Standard Chartered?

HSBC Holdings, trying to catch up with Citigroup and Standard Chartered, will take over Chinese Bank of Taiwan, a unit of the bankrupt Rebar Group that was seized in January following a run on deposits. The Central Deposit Insurance, the government's bad-debt agency, will pay HSBC 47.49 billion New Taiwan dollars, or $1.5 billion, to take control of Chinese Bank. HSBC will provide $300 million to $400 million of capital to shore up finances, and the acquisition will increase its island-wide branches to 47. HSBC is speeding up its expansion after rivals including Citigroup added branches and bought assets in Taiwan to serve Asia's wealthiest people outside China and Japan.

“HSBC is under heavy pressure to accelerate its acquisition after Citigroup and Standard Chartered,” said Parker Wu, a fund manager at Agricultural Bank of Taiwan in Taipei. “It's positive for Taiwan banks as the HSBC move will help stimulate and upgrade the overall competitiveness.” The acquisition will add to HSBC's eight branches in Taiwan. Chinese Bank, based in Taipei, is one of two remaining banks up for sale on the government's auction list, with Bowa Commercial Bank set to be sold on Jan. 31. “Taiwan is a key component of HSBC's Greater China positioning,” Vincent Cheng, HSBC's Asia-Pacific chairman, said in the statement. “HSBC is strongly positioned to benefit from the growing level of trade and investment in Greater China and across the region.”

HSBC, one of Europe's biggest banks, in 2001 paid $103 million for China Development Industrial Bank's 53 percent in China Securities Investment Trust, then Taiwan's biggest fund manager. The acquisition will add to the London-based bank's earnings from Asia, where it generated 47 percent of its pretax profit in the first half of this year. The bank's chairman, Stephen Green, said last month that the bank would add more banks in emerging markets. HSBC negotiated the deal directly with Central Deposit Insurance after rounds of auctions for Chinese Bank failed. In Taiwan's bank auctions, the winning bidder receives money from the government to take over sound assets, including branches, and at least half of the employees.

Central Deposit Insurance said in July that an auction of Chinese Bank had failed to attract any investors amid concerns about the professionalism of the bank's 2,400 workers, at least half of whom they would be required to employ. The turmoil in the island's banking industry has given foreign companies an opportunity to widen their Taiwan networks through acquisitions. Citigroup, the most profitable overseas bank in Taiwan, agreed in April to buy the Bank of Overseas Chinese for 14.1 billion New Taiwan dollars. The London-based Standard Chartered in September 2006 announced the acquisition of Hsinchu International Bank, the industry's first overseas takeover, for 40.5 billion New Taiwan dollars.

How will HSBC benefit from the takover of the Chinese Bank of Taiwan?