China's nod for credit card business a boost for HSBC

BEIJING • The approval won by HSBC Holdings to start a credit-card business in China's US$1 trillion (S$1.4 trillion) market offers chief executive officer Stuart Gulliver added flexibility in his push into the nation's retail banking and wealth-management industries.

The Chinese authorities' approval came as HSBC ended a card venture with Bank of Communications, the bank's Asia-Pacific head Peter Wong said in a weekend interview, paving the way for the British company to join Citigroup and Bank of East Asia as the only foreign credit-card issuers on the mainland.

Mr Wong did not say when HSBC won the nod from regulators, or provide any specifics on how the business will be rolled out.

Mr Gulliver's Asian ambitions have been dealt a setback by crashing commodity prices, a slowing Chinese economy and a pretax loss in the fourth quarter. 

An independent card unit in China would improve HSBC's access to a fast-growing market that had 449 million cards on issue as of September and allow the bank to find new clients for its retail bank.

Getting approved for its own operation in China "is a meaningful step for HSBC as it gives the bank the autonomy to run the business", said Shanghai-based analyst Chen Xingyu from Phillip Securities Research. "Since the Pearl River Delta is HSBC's focus, having its own credit card business can help the bank expand in the region."

Credit card offerings can act as a springboard for drawing customers to other parts of the business like private banking, Mr Chen said. HSBC is getting a licence for a planned brokerage venture with Shenzhen Qianhai Financial Holdings.

The Pearl River Delta, located to the north of Hong Kong and centered around the city of Guangzhou, is home to more than 40 million people.

HSBC plans to add 4,000 jobs in that area as it moves about US$100 billion of investment to Asia in an effort to expand retail banking and wealth management.

It will slow the pace of that hiring amid China's economic downturn, but will not alter its strategy, Mr Gulliver said last month.

The London-based HSBC has been working with Bank of Communications, China's fifth-largest lender by assets, since 2004 on businesses including credit cards. HSBC shares in Hong Kong fell 0.3 per cent yesterday to HK$49.50 at about 1.30pm local time, compared with the benchmark Hang Seng Index's 0.8 per cent loss. The bank's stock dropped 20 per cent this year.

Mr Chen said: "There's still strong demand for credit cards in China's first-tier cities, but the business is getting saturated in some areas. "That's why the potential in smaller cities is even bigger."

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A version of this article appeared in the print edition of The Straits Times on March 09, 2016, with the headline 'China's nod for credit card business a boost for HSBC'. Print Edition | Subscribe