BEIJING HSBC Holdings (0005.HK)(HSBA.L), Europe's biggest bank, will increase its stake in China's Bank of Communications (3328.HK)(601328.SS) by around 1 percent to the limit of the government's permitted level should opportunities arise, a senior executive said on Friday.
The bank currently owns about 19 percent of China's fifth-biggest lender and under current regulations, a foreign bank cannot own more than 20 percent of a Chinese bank.
"Our U.S. business has contracted and there is room for us to seek opportunities in the Asia-Pacific region," HSBC executive director and chairman for Asia-Pacific Vincent Cheng told reporters.
"We will increase our stake in BoCom if opportunities arise."
BoCom has granted HSBC an option to increase the global bank's stake in the Chinese bank to 40 percent by August 2012 subject to Chinese government approval.
HSBC and BoCom shares opened down 3 percent and 2 percent, respectively, on Friday, on continued worries over the financial health of the banking sector.
HSBC shares have lost nearly a quarter of their market value this week after it reported a bigger-than-expected profit drop in 2008 and proposed a rights issue to raise nearly $18 billion.
(Editing by Nick Macfie)