 HSBC is going back to Shanghai |
HSBC is buying a 19.9% stake in one of China's biggest banks, in an agreement worth $1.75bn (�930m). The deal with Bank of Communications is the biggest foreign investment so far in mainland China's financial sector.
It makes HSBC - founded nearly 140 years ago in Hong Kong and Shanghai - China's leading Western bank, ahead of rivals such as Citigroup.
The bank's presence on the mainland already encompasses holdings in Industrial Bank and Ping An Insurance.
Market access
Shanghai-based Bank of Communications is China's fifth biggest bank.
One of 15 with a licence to operate nationally, it has 2,700 branches across China.
Like its rivals, HSBC is keen to acquire a solid foothold in China as the country's economy accelerates.
Banks in China issued $173bn in new loans in the first half of 2004.
China's $1.3 trillion savings market is also a prize.
For Chinese banks, the attraction of a foreign partner includes the prospect of support in dealing with hefty bad loans.
'Solid'
HSBC is paying cash for its stake in Bank of Communications out of existing resources.
The deal includes separate agreements for technical assistance and for strategic co-operation between the two banks' credit card operations.
"This investment is a vital and important step in building our business in China," said Sir John Bond, HSBC's chairman.
The news comes less than a week after HSBC said half-year pre-tax profits rose more than 50% on the previous year to $9.37bn (�5.12bn).
The bank called the results a "solid performance", and said it saw "no obvious signs" of a deterioration in future trading.
Its existing Hong Kong affiliate, Hang Seng Bank, saw first-half profit rise 24% after a large increase in bad debt provision.
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This investment is a vital and important step in building our business in China 
