* Value of HSBC's Japan private banking assets $2.7 bln
* CS began onshore private banking in Japan in 2009
* Sale part of HSBC's strategy to quit areas where it lacks
By Saeed Azhar and Chikafumi Hodo
SINGAPORE/TOKYO, Dec 21 HSBC,
Europe's biggest bank, is retreating from Japan's private
banking market, selling a business that serves the wealthy to
Credit Suisse < CSGN.VX >, which is raising its profile
in the world's second-largest market for millionaires.
The sale is part of a strategy outlined by HSBC in May. CEO
Stuart Gulliver wants to cut annual costs by $3.5 billion and
sharpen the bank's focus on Asia by quitting countries or
businesses where it lacks scale.
HSBC said the gross assets of the business being sold were
worth $2.7 billion at end-October, but it gave no sale price.
"(HSBC) is focusing on raising its return on equity and
cutting costs, so it will focus on the high growth business,"
said Daniel So, Sun Hung Kai Financial strategist in Hong Kong.
"They probably don't see much growth potential in the
Japanese market, so will do better to focus resources in other
countries in the Asia-Pacific region."
Asia is a battleground for global and local private banks
competing for market share in a region that is fast outpacing
the United States and Europe in economic growth.
Powered by China and India, Asia-Pacific's millionaire ranks
rose 10 percent to 3.3 million last year, just behind the 3.4
million in North America and ahead of Europe's 3.1 million,
according to a Merrill Lynch/Capgemini Asia-Pacific wealth
Asia's combined wealth rose 12 percent to $10.8 trillion
last year to overtake Europe and close in on North America,
where wealth rose 9 percent to $11.6 trillion. More than half
the world's millionaires are still to be found in the United
States, Japan and Germany.
Asia's private banking industry has seen consolidation
recently as the market turmoil dampens growth, and rising
regulatory and staffing costs dent profitability.
Swiss private bank Julius Baer said in October it
was buying the Asian private wealth portfolio of Australia's top
investment bank Macquarie Group.
HSBC will sell its top-tier Japanese private banking
business, which covers clients who hold more than 200 million
yen ($2.57 million) in financial assets, said an official at
HSBC Japan, who spoke on condition of anonymity.
But it will retain HSBC Premier, the private banking service
that covers clients who hold more than 10 million yen in assets,
the official said, declining to provide details on the number of
staff involved in the bank's top-tier private bank section.
Credit Suisse said it plans to expand client coverage
through integrating new offices in Nagoya and Osaka in western
Japan and aims to boost profitability. Currently the Swiss bank,
which has targeted Japanese investors holding more than 1
billion yen in assets, has an office in Tokyo.
Japan has 1.7 million millionaires in dollar terms, and is
by far the single largest market for high net worth individuals
in the Asia-Pacific region, accounting for 52.5 percent of the
region's millionaires and 38.2 percent of its wealth at
end-2010, according to the wealth report.
Japanese millionaires had assets of about $4.135 trillion at
the end of 2010, the report said.
Junya Tani, head of private banking for Credit Suisse in
Japan, said the deal showed the bank's "commitment to build a
leading private banking business in Japan, acquire assets and
"Since we began our onshore private banking business in
2009, progress has exceeded expectations, and we are looking
forward to building on this success with this acquisition."
Credit Suisse said its private banking business in the
Asia-Pacific region has been among the fastest-growing of its
international wealth management businesses, with annual
double-digit growth in net new assets.
Rival UBS has also been strengthening its business
in Japan and Asia-Pacific. Still, the Japanese private banking
industry is dominated by local banks, analysts said.
HSBC last month reported a 36 percent fall in third-quarter
profits as the euro zone debt crisis hit investment bank income,
while strains in the U.S. economy saw bad debts there jump by
almost $1 billion, the first rise in two years.
HSBC has said it will retreat from 14 countries, including
selling its U.S. credit card business and branches in New York
state, retail businesses in Russia and Poland, and its Canadian
"It's just indicative of the bank trying to become a little
more lean, a little more focused," said Daniel Tabbush, regional
banking analyst at CLSA. "It shows how big this bank really is.
They've got things everywhere and could divest (some)."
HSBC also said on Wednesday that Dar Es Salaam Investment
Bank, a 70.1 percent-owned subsidiary of HSBC Asia Holdings BV,
sold its near-20 percent interest in Iraqi insurer Dar Es Salaam
Insurance to Gulf Insurance Co for about $1.3 million.
HSBC shares were up 2.25 percent in Hong Kong.
The acquisition, which needs regulatory approval,
is expected to close in mid-2012.