Spot the odd one out: ICBC, CCB, HSBC, BOC. The four big banks operating in China may have similar sounding initialisms, but one of them – HSBC – isn’t Chinese at all. The UK-based lender, listed in London and Hong Kong, sees itself as stateless. But its national agnosticism may be getting harder to sustain.
Recent moves by HSBC have left the lender’s corporate character looking a little more Chinese. It just became the first foreign company authorised to issue a bond in China’s local currency. HSBC has also applied for a listing in Shanghai, where shares typically trade at a 30% premium to their Hong Kong-listed equivalents.
HSBC’s actions are largely diplomatic. Sure, raising local funds through the yuan bond will reduce HSBC’s currency risk and match assets with liabilities. But at a probable Rmb3 bn ($440 mn), the issue is a drop in the South China sea. Hong Kong bank accounts held a trifling Rmb53 bn ($7.8bn) in Chinese currency at the end of March, official data shows.
The listing also looks like a gesture. HSBC’s London quote offers Western investors a play on Eastern finance. That’s why two-thirds of the bank’s shareholders are registered through London rather than Hong Kong. Chinese stock-pickers can buy shares in Chinese banks already.
Still, HSBC is right to humour the People’s Republic. China’s state-owned lenders are increasingly potent rivals. Chinese banks have toppled Citi and Bank of America as the world’s most valuable bank brands, according to consultancy Millward Brown. ICBC is the world’s biggest lender by deposits.
Looking a little more Chinese should help HSBC in case Beijing decides explicitly to back local firms over foreigners, both at home and abroad. The financial crisis has made that more likely. Statelessness may have been an asset for HSBC up to now, but a more Chinese identity could be valuable hereon.
A Shanghai listing and increased local funding would show HSBC is the kind of guest who wants to fit in with the home crowd. But to be anything more than a niche player in the PRC, the bank may have to do more. That could mean reviewing its least Asian feature - the London headquarters. That soul-searching moment hasn’t arrived yet, but it has moved a little closer.