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HSBC: emerging markets are fast lane to growth

8th June 2006
By Katie Langridge

HSBC anticipates substantial private banking growth thanks to emerging markets.

Clive Bannister, head of HSBC's private banking operation, has told Reuters that he expects the group's massive client base to fuel rapid growth in its private banking arm as wealthy populations spiral in emerging markets. Mr Bannister's confidence seems well placed as HSBC does indeed stand to benefit hugely from its position as a major worldwide player in a time of consolidation and expansion.

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Mr Bannister has said that he believes that HSBC's wealth management business will grow swiftly in the wake of the rapid development of several important emerging markets. He told Reuters that the bank's sizeable worldwide retail client base will support this as a significant proportion of its customers are achieving wealthy status in regions such as China, India, South America, Russia and the Middle East.

Mr Bannister also believes that the current state of fragmentation in the wealth management industry in more developed markets in North America and Europe means that there is "plenty of scope for expansion" here as well. Commenting on the private banking industry as a whole, Mr Bannister said he thought the industry could expect "substantial growth".

Currently HSBC's private bank only holds a market share of approximately 1% worldwide, despite the fact that the bank is the third largest in the world. The market leader, UBS, only holds around 3.5%. Recently the company's private banking rivals have been hinting at carrying out aggressive acquisition policies, but Mr Bannister says HSBC's strategy is to grow organically.

The stance adopted by the private bank CEO is unsurprising given the enviable position that HSBC holds. With a truly global presence, it is in a prime position to capitalize on Chinese growth, for example, where the high net worth population is expected to grow at an average annual rate of 11.6% to 2008.

HSBC is also right to look to its existing retail base as an efficient way of recruiting clients to its private bank in these regions, as very few global players can currently match HSBC's branch presence in these markets. However, it is harder to see organic growth producing similar results for the bank in developed markets. Here, although the market is fragmented, the sheer number of players means that acquisition is likely to be a more effective strategy.
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