HSBC Holdings PLC expects Credit Commercial de France to provide in Europe what it hopes from Republic New York Corp. here: a retail presence strong in private banking and asset management.
London-based HSBC announced over the weekend that it will buy Credit Commercial, France's fourth-biggest publicly traded banking company, for $10.5 billion. It would be the largest cross-border acquisition ever in European banking.
Like Republic, which HSBC acquired in December for around $10 billion, the Paris bank focuses on private banking and asset management and has a solid retail and corporate middle-market position.
"The euro zone was one area of the world in which we were significantly underrepresented," an HSBC spokeswoman said. "This purchase will allow us to serve our global customers in Europe in a way we were not able to do previously."
HSBC had $569 billion of assets at yearend and Credit Commercial $66.5 billion. Analysts said they expected HSBC to quickly merge the French company's activities with Safra Republic, Republic New York's European private banking network.
"It would be perfectly feasible to argue that this is a private banking/asset management story," said Christopher Williams, a banking analyst in London with Donaldson, Lufkin & Jenrette.
He and other analysts said that despite the business-line similarities, cost savings are not the impetus behind the deal.
"Cross-border transactions have tended not to add much value, because of the difficulty the parent company has in bringing anything to the party that will enhance the competitive position of the company they are acquiring," Mr. Williams said.
HSBC's share price fell 5.5% in London on Monday to $11.20 amid concerns that it offered too much for Credit Commercial and may be spreading itself too thin.
Jon Kirk, a banking analyst at Fox-Pitt, Kelton in London, said investors "are also confused because HSBC had implied that its strategy was to expand in emerging markets."
The deal is subject to regulatory approval and is expected to close in June.
