HSBC Private Bank Chief Doesn't Rule Out Buyouts

HSBC Private Bank could use acquisitions to expand in the United States, its chief said, despite recent statements by the parent's chairman that the company would avoid major expansion where it already operates.

"We have more room to grow in the U.S. market than in Asia or Europe, where we have longer legacies," said Gerard Aquilina, the chief executive of HSBC Private Bank in the Americas, in an interview March 9. "Where it makes sense, we'll go."

He spoke three days after the $1.5 trillion-asset HSBC Holdings PLC reported 2005 earnings. Its chairman, Sir John Bond, said the company would invest more in emerging markets than in established markets such as the United Kingdom, Hong Kong, the United States, and France. But he also said HSBC would seek "opportunities to strengthen our established franchises."

Mr. Aquilina said acquisitions for the private banking unit here will not be a focal point of its growth strategy. HSBC Private Bank will also look into setting up shop in places where HSBC has retail banking branches.

He said such a plan would let the private bank benefit from existing strategies even though its customer profile is much different from the retail side's - HSBC Private Bank targets investors with at least $25 million of investable assets. Nor does HSBC Private Bank plan to target individuals with net worth below $25 million, he said.

The company just hired Marlon Young from Citigroup Inc. to work with Mr. Aquilina on strategy for the unit. Mr. Young headed private client lending at Citi's Smith Barney, where he spent 27 years, and started his new job Wednesday (the company said he was not available for an interview). He also led the Northeast region for Citigroup Private Bank and headed investment finance for the Northeast and Middle Atlantic regions.

HSBC Private Bank, which has $54 billion of assets under administration, has offices in seven U.S. metropolitan areas and HSBC Bank USA overlaps with four of them: Wilmington, Del., New York, Buffalo, and Miami. Though it is eyeing new markets, it also wants "to add depth to those locations that we are already in," Mr. Aquilina said.

In those markets the private bank focuses on clients who own and manage their own companies, particularly in commercial real estate, hedge funds, media, and entertainment. Mr. Aquilina said it would continue to emphasize entrepreneurs.

HSBC Bank USA has 200 branches in nine states, three-quarters of them in New York State. Mr. Aquilina would not specify where in those states the private bank would look to expand.

HSBC created a U.S. private bank Dec. 31, 1999, when it bought Republic New York Corp., the parent of Republic Bank of New York, for $9.9 billion. The combined company, formerly HSBC Republic, took the name HSBC Private Bank on Jan. 1, 2004.

Since buying Republic, "cross-sales with the rest of the group have been limited," said Mark Thomas, an analyst in London with Keefe, Bruyette & Woods Inc.

Mr. Thomas said that analysts do not follow the U.S. private banking unit closely because it is such a small component of its London parent.

In 2005, HSBC Private Bank reported pretax net income of $104 million, while HSBC Holdings had a pretax net income of $21 billion, according to a March 6 Securities and Exchange Commission filing.

But the private bank contributed 10% to the U.S. operation's pretax earnings and had the highest earnings growth of HSBC USA Inc.'s five business lines. The private bank's 2005 earnings rose 129%.

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