(20 August 2010 – Australia) The top boss at HSBC has said the Asian banking market is becoming increasingly expensive as rival banks push deeper into the region through major acquisitions.Michael Geoghegan, HSBC’s global CEO, speaking from Sydney yesterday as part of an 18 country roadshow, posed the question to other banking boards currently doing acquisitions in Asia; does the price justify the return?
There are some very significant players on the ground in the region making it difficult to grow a business from scratch, especially with the possibility that any initial acquisition could be expensive, Mr Geoghegan added.
Mr Geoghegan said bank values varied in the region and could be very expensive.
There is really two Asias. Banks in Japan and South Korea have a return on equity below 10 percent, Mr Geoghegan said.
HSBC’s target range for return on equity is 15 to 19 percent and we are making 23 percent out of the Hong Kong and Shanghai Banking Corporation, Mr Geoghegan added.
The warnings from the HSBC global boss come as Australia and New Zealand Banking Group moves forward with its super regional strategy.
The bank is conducting due diligence to buy a 51 percent stake in the Korean Exchange Bank, possibly valued at around A$3.9 billion.
Australian operations are well positioned to take advantage of the increasing number of local businesses moving into Asia, Mr Geoghegan highlighted.