Banking giant HSBC Bank USA, the former Hong Kong and Shanghai Banking Corp., is making a big push into Los Angeles with plans to open up to 20 new branches in the next three years.
Though barely a ripple in Los Angeles’ overall banking market, HSBC has launched an aggressive expansion strategy in 11 states, and is capitalizing on its name recognition among ethnic Chinese.
In Southern California, HSBC is marketing itself as a bank that caters to businesses investing in China, particularly import-export firms that might benefit from having bank branches in Shanghai, ShenZhen and Los Angeles.
The biggest challenge for HSBC, a unit of HSBC Holdings Plc of London, is that Southern California already has many entrenched names in Chinese banking.
Cathay Bank, a unit of Cathay General Bancorp, operates nearly 30 branches here, East West Bank, a unit of East West Bancorp Inc., has about 50 branches, and Far East National Bank, a unit of Taiwan’s Bank Sinopac, has 11 branches.
HSBC currently has nine bank branches and expects to have 11 by year-end.
“We don’t underestimate the competition, it’s out there,” said Brian Gregson, senior vice president and district executive in California, who admits that HSBC is not competing for retail customers from Bank of America Corp. or Washington Mutual Inc. But HSBC has a joint venture with Wells Fargo & Co. called the Trade Bank that allows Wells Fargo customers to tap into HSBC’s trade finance services.
Local rivals are nervous about its expansion.
“They are international and they get lots of referrals from Hong Kong and overseas because customers that come to Los Angeles can easily establish themselves through their banking facilities,” said Patrick Siu, chief credit officer at American Premier Bank in Arcadia, a one-branch bank that opened last year.
Siu said local banks are concerned because HSBC is marketing itself as a local bank with global power it has 97,000 branches in 77 countries while emphasizing its large branch network in Hong Kong and China, where it has operated since 1865.
It also is competing for the same customers as other Chinese banks, emphasizing small business loans and middle-market banking. The difference is that with assets of $1.5 trillion, HSBC can offer loans ranging from $2 million to as high as $20 billion, an amount out of reach of the smaller rivals.
“I was in Mexico not too long ago and I visited a lot of small towns and HSBC is all over the place there too,” Siu said.
Gregson said HSBC has a strategic plan to fill out branches in Orange County and the San Gabriel Valley. He thinks that the bank’s name has enough cachet to attract Vietnamese, Thai and Cambodian customers.
One problem for HSBC is finding branch locations since real estate is at the peak of the market. The company has opened real estate lending offices in both Northern and Southern California and is looking to hire new bankers.
“When I first opened branches, it was like pulling teeth to find bankers in Southern California, but now that they’ve seen our expansion, it’s much easier,” Gregson said.
Lending giant
HSBC has been mentioned in banking circles as a possible suitor of Washington Mutual, primarily because it has been on an acquisition binge.
Two years ago, it paid $14.2 billion for subprime lender Household International Inc., launching it into the ranks of major mortgage lenders. With that acquisition, HSBC now has 5,100 employees in California, and may be looking at more acquisitions locally as it challenges Countrywide Financial Corp. and Wells Fargo, the leading mortgage originators.
Lately, its focus has been on China. Earlier this month, HSBC bought a 20 percent stake in Bank of Communications, China’s fifth-largest bank, becoming the largest foreign investor in a Chinese bank. It also owns slices of Bank of Shanghai and Ping An Insurance, China’s second-largest life insurer, which recently debuted on the Hong Kong Stock Exchange.
“Every bank in the world is targeting China because of mortgage originations and import-export business,” said Stacy Sun, chief executive of Asia Pacific USA Chamber of Commerce.
So far, only HSBC and Bank of America have a large presence in China. Others, including Far East National Bank, operate representative offices in preparation for offering banking services.
HSBC could get a boost in Southern California from its strong banking presence in New York. It currently operates the largest ATM network in New York State, legacies from acquisitions of Marine Midland Bank in 1980 and Republic National Bank in 1999.
