HSBC Holdings PLC plans a major expansion of its Asian equities trading and distribution business.
The $497 billion-asset banking company said it aims to make HSBC Securities Asia one of the top three brokerage firms in the region over the next three years.
The plan was spurred by the headway of U.S. firms in Asian securities markets, said Stuart Gulliver, HSBC's head of Asian treasury and capital markets.
HSBC is now barely breaking even in Asian equities trading and distribution, Mr. Gulliver said, but such activities are expected to contribute $100 million a year to net income by 2002, he said.
To meet this goal the company will recruit people to sell and trade stocks, equity derivatives, and convertibles, he said. Most of the new positions will be in trading.
Krishna Patel, head of global equities for HSBC in London, will run the Asian business along with Mr. Gulliver.
HSBC has only 300 employees in Asia devoted to the equities business, compared with 1,064 in treasury and capital markets.
"Over the last five years, U.S. investment houses have arrived in droves," Mr. Gulliver said. "We have been slow to respond" to inroads made by companies such as Merrill Lynch & Co. and Goldman, Sachs & Co.
Given HSBC's long-standing ties to Asia, it "should be the preeminent non-U.S. investment bank in the region," Mr. Gulliver said.
HSBC's flagship, Hongkong and Shanghai Banking Corporation Ltd., is the largest bank in Hong Kong and has 600 branches in 21 Asian countries.
About 40% of the parent HSBC's profits come from its Asian operations.
HSBC's expansion into emerging markets and developed ones, including the United States, has created a broad international platform ideal for launching business lines, analysts said.
"Given the relatively sluggish organic growth in the commercial banking business, HSBC has been trying to diversify its revenue sources," said Fred Puorro, senior analyst at Thomson Financial BankWatch. "Now they have to use this international franchise."
The new effort in Asian equities is part of a larger campaign to strengthen the company's investment banking practice by leveraging its solid commercial banking background.
Mr. Gulliver said HSBC is "looking to co-align investment and commercial banking" in an effort to bank more of its own clients and use its capital more efficiently.
He also noted that the company is positioning its equities trading and distribution capabilities to service the primary side of the business - - fee-heavy underwriting and initial-public-offering activities.