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November 28, 2010

HSBC Eyes Australian Expansion

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HSBC Eyes Australian Expansion

SYDNEY—HSBC Holdings PLC, Europe’s biggest bank by stock-market value, will beef up its corporate-finance business in Australia, part of a strategy to increase its presence in an economy booming on the back of Asia’s demand for commodities, the lender’s local chief executive said.

“There’s a lot of interest in good corporate fundamentals coming out of Australia,” Paulo Maia, HSBC’s Australia head, said in an interview with The Wall Street Journal.

A greater emphasis in Australia comes as HSBC and other international lenders search for low-risk opportunities outside more traditional markets in the U.S. and Europe, which are recovering more slowly than Asia from the global financial crisis. Asia accounts for more than half the bank’s total earnings.

The bank plans to hire for its Australian debt capital markets team as well as expand its onshore leveraged acquisition and loan syndication operations, said Mr. Maia, who was previously deputy chief executive of the European bank’s Brazilian business.

HSBC particularly wants to tap into the growing market for leading local corporations and banks to borrow money offshore. Already this year, the volume of nonbank corporations issuing foreign-currency debt has grown by 35% to 13.97 billion Australian dollars (US$13.71 billion) split across 26 deals, according to Dealogic.

HSBC’s first-half pretax profits from Australia grew 28% compared with a year earlier to A$152 million. Still, that’s a slower rate of growth than seen at local rivals, including Commonwealth Bank of Australia, which in the same period recorded a 37% jump in pretax profits.

Compared with its Australia rivals, HSBC has a relatively small retail-branch network in the country. But Mr. Maia rulef out buying a smaller local bank to build its presence in big urban centers like Sydney, Melbourne and Brisbane.

“We haven’t been able to identify any bolt-on acquisitions that would make sense for us,” he said. “We want to play on the mass affluent; we don’t want to go too much downmarket.”

HSBC’s enthusiasm for Australia comes as the bank remains locked in a war of words with the British government over the rising cost of basing itself in Europe. The bank’s outgoing CEO, Michael Geoghegan, and his successor, Stuart Gulliver, have warned separately that new rules proposed to curb pay in the financial-services industry are putting it at a disadvantage to its U.S. rivals in international markets.

From The Wall Street Journal – WSJ.com

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September 26, 2010

Canadian banks may target U.S. regionals

 

Canadian banks may target U.S. regionals

New Basel rulings give Canadian banks opportunity to deploy capital

SAN FRANCISCO — Weak U.S. regional banks could be attractive targets for Canadian banks looking to expand their U.S. holdings, Credit Suisse Global Research analysts said in a note Friday.

New rulings from the Basel Committee on Banking Supervision, issued earlier this month, changed the definition of capital in a way that presented Canadian banks an opportunity to expand, said Credit Suisse analyst Nick Stogdill.

“It gives banks more certainty in deploying capital,” he told MarketWatch. Read more about new Basel capital requirements.

Potential U.S. targets include TCF Financial Corp. (TCB) in the Midwest, and Regions Financial Corp. (RF) and Synovus Financial Corp. (SNV) in the Southeast.

U.S. regional banks make good takeover targets for stronger Canadian banks because they are experiencing weak loan growth and have to operate under tight regulation, Credit Suisse said in its report. Other problems include pressure on net interest margins and low valuation relative to other financials.

“Canadian banks are motivated by a desire to add scale in specific regions at attractive valuation levels,” the report said.

The $1.5-billion First Niagara (FNFG) takeover of New Haven, Conn.-based NewAlliance (NAL) in August may have started the trend, the analysts said. First Niagara characterized the acquisition as “playing offense” by entering new markets that will enable profit growth.

“We will be able to do even more for the community as a larger, stronger institution,” First Niagara said in a statement. “This is another very positive step forward for both our Main Street and Wall Street constituents.”

The Credit Suisse report points to two Canadian banks, Toronto Dominion (CA:TD) and the Bank of Montreal (CA:BMO) , as potential buyers. Specifically, the analysts believe “TCB (TCB) and BMO’s Chicago-based Harris bank make an attractive combination.”

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