Citigroup, HSBC, two others launch China units

(Rewrites first two paragraphs; adds Citigroup's card plans in final paragraph)

By George Chen

SHANGHAI, April 2 (Reuters) - Four foreign banks, including Citigroup Inc. (C.N) and HSBC Holdings Plc. (HSBA.L), kicked off domestically incorporated Chinese units on Monday, becoming the first foreign banks able to tap China's $2 trillion in personal savings.

The other two are Asia-focused Standard Chartered Plc. (STAN.L)(2888.HK) and Hong Kong's fifth-largest lender, Bank of East Asia (0023.HK), while more than 10 overseas lenders are still awaiting Beijing's approval to launch Chinese subsidiaries.

The four approved banks are free to take deposits of any size from any Chinese customers after local incorporation, although Citigroup, HSBC (0005.HK) and Standard Chartered said they would continue to focus on large accounts, due mainly to the limited size of their branch networks in China.

But smaller Bank of East Asia said it would welcome new accounts with deposits as small as 1 yuan (13 U.S. cents).

Only foreign banks that are incorporated in China are allowed to operate accounts with less than 1 million yuan for Chinese individuals.

Bank of East Asia currently operates only 31 outlets in 13 cities, but it plans to expand its network to 100 outlets by 2010 and add 1,000 new employees this year.

"We don't have any specific requirement (for deposits) as we want to be a real local bank from now on," said Chan Kay-cheung, deputy chief executive of Bank of East Asia.

Chan expected the bank's business in China to contribute 35 percent of the group's net profit by 2010, up from 15 percent last year, as it takes on more customers.

Citibank (China) Co. Chairman Richard Stanley, however, said his bank still lacked enough staff and branches to offer services to small savers on a par with the big state-run banks.

Stanley didn't specify any minimum target for deposits, saying the bank was still working on final approval from Chinese regulators, but indicated that Citigroup would stick with its emphasis on wealthy clients.

HSBC took a similar stance.

PREMIUM SERVICES

"We will continue to focus on our premium services ... Our market positioning will be unchanged after local incorporation," said Catherine Fok, head of personal financial services at HSBC Bank (China) Co.

The minimum deposit for a premium customer at HSBC in China is 500,000 yuan.

HSBC also announced plans on Monday to nearly double the number of outlets in China to about 65 by the end of this year, although it would still be far smaller than a major state lender, which would operate around 200 outlets in a major city such as Shanghai. (For details on HSBC click on [nSHA235429]).

Most major global banks have already made investments in China's banking sector, in part to tap their partners' huge branch networks.

Citigroup, the world's biggest financial services provider, bought a nearly 5 percent share of Shanghai Pudong Development Bank (600000.SS) for $72 million in January 2003, making it the first foreign bank to become a strategic partner of a Chinese lender.

Last year, Citigroup led a consortium that bought control of China's Guangdong Development Bank for $3.1 billion.

HSBC bought a nearly 20 percent stake in China's Bank of Communications (3328.HK) for $1.75 billion in August 2004, and has an 8 percent stake in city lender Bank of Shanghai.

"Local incorporation supports our two-pronged China strategy, increasing our ability to achieve organic expansion and creating greater opportunities for cooperation with our strategic partners," said HSBC's Asia chairman, Vincent Cheng.

HSBC is considering issuing its own credit card to premium customers while continuing to run a co-branded card business with Bank of Communications, said Richard Yorke, HSBC China's chief executive.

Citigroup's Stanley said his company had no plans to issue its own credit card in China in the near future, as it wanted to continue working with Pudong Bank in their co-branded credit card business. He added that Citigroup planned, however, to issue a cash card independently for account holders at its China unit.

(For details on Citigroup click on [nSHA159078]).

($1=7.73 Yuan)

((Editing by Edmund Klamann; george.chen@reuters.com; Reuters Messaging: george.chen.reuters.com@reuters.net; +86 21 6104 1795)) Keywords: CHINA BANKS/ Keywords: CHINA BANKS/

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