INTERVIEW-HSBC Eyes Indonesia in Emerging Markets Push

* Plans to launch banking services for small and mid-sized firms in Indonesia

* Targets growth in emerging Asia including China, India, Vietnam, Malaysia

(Adds details, quotes, background)

By Tony Munroe and Michael Flaherty

HONG KONG (Reuters) - Global bank HSBC Holdings (HSBA.L), whose strength in emerging markets helped offset a dismal 2007 for its U.S. business, is stepping up its presence in Indonesia and other developing Asian economies.

London-based HSBC (0005.HK) said on Tuesday it plans to launch banking services this year for small and medium-sized enterprises (SMEs) in Indonesia, a market it has targeted for expansion along with China, India, Vietnam and Malaysia.

"It's economy is growing well, it's a resource economy, it's aligned itself to a more stable form of government, and it is open to foreign investment," said Sandy Flockhart, HSBC's Asia chief executive, a day after the lender posted a 10 percent rise in 2007 pretax profit despite a $17.2 billion bad debt hit.

HSBC's pretax profit for Indonesia last year rose 46 percent to $104 million after declining the previous year. Loans and advances in the country, where HSBC has more than 80 branches, grew nearly 23 percent to $1.64 billion.

"We've got a new corporate and markets business there, we're growing commercial business and the SME segment, and the retail and consumer side, so there's plenty to do. It's a big country."

Flockhart said HSBC plans to expand in Indonesia based on its existing presence there, but did not rule out acquisitions.

Singapore state investment agency Temasek [TEM.UL] said last week that it may sell its stake in Bank Internasional Indonesia (BNII.JK), the country's sixth-largest bank, a potential deal Flockhart said he was not keeping abreast of.

"If there was something that was attractive in Indonesia, we'd probably look at it," Flockhart said in his office at the bank's Asia headquarters in Hong Kong, declining to elaborate.

Southeast Asia's biggest economy, devastated by the Asian financial crisis a decade ago, has been enjoying the surge in global commodity prices and saw gross domestic product growth last year of 6.32 percent -- its highest in over a decade.

The country last month cut its growth forecast for 2008 to 6.4 percent from 6.8 percent on worries over high oil prices and U.S. economic weakness.

"As these resource economies do well and the volatility of money within their economies continues to grow, it also provides an impetus to the middle market segment of their markets and we're focused on that," Flockhart said.

"We see Indonesia as looking stable, as following good economic practices, having large margins on its commodities at this moment, and looking like an attractive place to continue to grow," he said.

HSBC's 2007 earnings were bolstered by a 42 percent profit rise in its Hong Kong business, while earnings grew 70 percent in the rest of Asia, helping to offset a loss in the United States, where HSBC has suffered amid the U.S. housing crisis.

Flockhart named several emerging markets in the region that will be priorities for 2008.

"We will continue to invest quite strongly in Indonesia; we'll continue to invest in India quite strongly; we're going to continue to invest in China, and Vietnam. So these countries will all be our priorities, and Malaysia as well."