HSBC, the world's second largest bank, yesterday said it had no plans to expand into Japan or Germany, dashing the hopes of investors who looked to the banking giant to rescue ailing financial institutions in those countries.
Chairman Sir John Bond said making a significant acquisition in Japan "would be hugely dilutive in terms of return on investment". His position is in sharp contrast to that of Goldman Sachs and Merrill Lynch, the US investment banks. Goldman is investing Y150 billion (€1.14 billion) in Sumitomo Mitsui Financial Group and Merrill is interested in investing a similar amount in Mizuho.
Sir John said one of the "strategic debates" within the bank was "how we can build a successful business in Japan".
But he said that although Japan was the world's second largest economy, it was "hard to see how we can participate in the Japanese economy and make the sort of return we need to see at present". Germany offered few opportunities either, he said. Banks there have seen their market values plummet as their profitability has been eroded, leading many investors to hope foreign banks will come to their rescue. But Sir John said: "Sometimes things are cheap for a reason." Referring to the dominant market share of public and quasi-public sector banks in Germany, he was reluctant to invest in a market "where less than 20 per cent of the market meets shareholders every year". But he sees huge opportunities in China and wants to strike up partnerships that give HSBC access to distribution.
He said HSBC wanted to be the leading international financial services organisation in China.
HSBC, which hopes to complete its $14 billion acquisition of Household, the US consumer finance group, later this year, reported pre-tax profits after goodwill amortisation up from $8 billion in 2001 to $9.65 billion last year. Bad debt provisions fell to $1.32 billion from $2 billion, reflecting the bank's lower exposure to Argentina. The shares put on 4p to 688p helped by the fact that HSBC now plans to pay quarterly dividends. Sir John said that was "in view of the importance of dividends to investors".
But some analysts pointed to the second-half acceleration in operating costs, which rose from $14.6 billion to $14.95 billion.
Mr Douglas Flint, finance director, said some one-off costs had been pushed into the second half.
The second interim dividend is $0.325 making the total $0.53, up 10.4 per cent.
An investment banker has withdrawn a $16.5 million lawsuit against Lehman Brothers that alleged breach of contract and constructive dismissal after the two sides settled out of court, lawyers said yesterday.
In one of the biggest claims of its kind in England's High Court, Kerim Derhalli claims the Wall Street bank still owed him $16.5 million in bonuses.
