BUFFALO - With its U.S. unit solidly back on its feet, Hongkong and Shanghai Banking Corp. is looking to cash in on the expanding trade between the United States and Asia.
"There's an awakening in America to the opportunities out there" said Sir William Purves, chairman of the bank and its London-based parent company, HSBC Holdings PLC.
He was interviewed at the Buffalo headquarters of the company's Marine Midland Banks Inc.
"Our aim is to bridge the trade and financial needs we see being generated by Asia's fast economic growth," Mr. Purves said, "to meet the growing demands of the made, currency, and capital flows between Asia and North America and Europe."
A Priority for U.S.
Hongkong and Shanghai's push into banking between the United States and Asia comes as the U.S. administration is making trade with Asia a top priority of its economic recovery program.
At a three-day summit meeting of the Asia-Pacific Economic Cooperation forum in Seattle this month, administration officials stressed that they see Asia's rapidly growing markets as prime targets for U.S. businesses.
"Asia and the Pacific are now the most lucrative terrain for American exports and American jobs," observed Winston Lord, assistant secretary of state for Asian affairs.
Poised to Benefit
Hongkong and Shanghai, with some $276 billion of assets and operations in 66 countries around the world, is not only one of the world's largest banks but also the bank best poised to profit from any growth in business between the United States and Asia.
It is also one of the biggest and oldest foreign banks in the United States, having opened its first U.S. branch, in San Francisco, in 1875.
The bank now has over $20 billion of assets in this country. That includes the $16.5 billion-asset Marine Midland Banks Inc. and over $4 billion of assets through 14 direct branches and agencies. Few foreign banks have so large a network in this country.
Alliance with Wells
In addition, Hongkong and Shanghai has teamed up in a strategic alliance with Wells Fargo & Co. to supply Asia-related banking services to customers of the Los Angeles-based bank.
"Trade finance is a large component of our business," Mr. Purves said.
"Many [U.S.] banks have no expertise in that area, and it costs quite a bit of money to develop."
As part of its broader global expansion, Hongkong and Shanghai's has been steadily integrating its own operations with Marine Midland's since first taking a stake in the New York State bank 12 years ago.
Turning a Corner
Marine Midland lost large amounts over the last several years, mainly as a result of problem real estate lending, but turned the comer last year with more than $100 million in net earnings.
"We expect to see further dividends coming out of Marine," Mr. Purves said.
Earnings so far this year have already topped that figure and gave Marine Midland a 14% return on equity for the first nine months. The executive said his goal is to boost return on equity to around 18%.
Putting the bank back on its feet hasn't been easy, Mr. Purves said, but he asserted that it is well positioned to supply increased earnings, he asserted.
"You might well ask: How does a regional bank fit in with all of this [intemational strategy]?" he said. "Well, don't forget that New York State is the second-most-populated state in North America and has a long record in international trade - and trade remains one our core businesses."
It would be wrong to think of Marine as only a regional bank," Mr. Purves added, since its customers can easily tap into Hongkong and Shanghai's extensive international network and services.
"Marine is very much part of our group," Mr. Purves said. One of the bank's prime goals is to "help introduce small and medium-size businesses to Asia, where our group is strongly based."
Traditional Functions
In admition to trade finance, Marine Midland will continue to focus on traditional deposit taking and lending to business and consumers, sales of mutual funds, and credit cards and educational lending.
As part of the long-running drive to integrate Marine Midland's operations with those of Hongkong and Shanghai's international network, the two banks are jointly developing an in-house global banking system known Hexagon.
Mr. Purves emphasized that technology will play a key role in helping Hongkong and Shanghai keep pace with the rapid growth in cross-border trade and banking.
"It's a very expensive game, but we do pride ourselves on being ahead," he said. "The banks that get it right will be the ones that will succeed."
N.Y. License Sought
In an effort simplify its operations and reduce its regulatory burden in the United States, Marine Midland has applied to exchange its federal license, issued by the Office of the Comptroller of the Currency, for a state license from New York. The state already regulates the group's wholesale branch banking network.
Mr. Purves said excessive regulation and barriers to interstate banking are among the main obstacles banking in the United States.
"I sometimes wonder why banks need four regulators - the Federal Reserve, the OCC, the FDIC, and state regulators," he said.
He added that the regulatory burden on banks in the United States is being seriously compounded by the virtual absence of similar regulations restricting the growth of nonbank finance companies.
"We see a very uneven playing field," Mr. Purves said. "Banks are heavily regulated, nonbanks are not."
After several years of hectic growth capped by $1.85 billion in net earnings in 1992, Hongkong and Shanghai is entering a periad of consolidation worldwide, Mr. Purves said.
He expressed satisfaction with the results of the bank's massive international expansion, which included last year's purchase of Midland Bank PLC, Britain's fourth-biggest clearing bank.
Keeping Decisions Local
"There are those who say global banking doesn't work," Mr. Purves said. "And if you look at the evidence of the last 10 years, there's some evidence to support that.
"But we believe in keeping decision-making close to where your customers are, and we think the recipe we have will work."
The 61-year-old executive, who began his career 45 years ago as a banking clerk in a small town in Scotland, has retained a strong grasp of fundamentals.
"Banking is still a people business," he said, "and you need to have good people to succeed.
"Banks ran into problems because people made mistakes that led to bad loans and high provisions. Turning capital into profits, providing good service, and avoiding provisions for losses is what banking is all about."
