The Hong Kong and Shanghai Banking Corp Ltd has teamed up with China Ping An Trust & Investment Co to buy a joint-venture bank on China's mainland to expand consumer banking as the country continues to open up the banking sector.

HSBC, the world's second-largest bank by market value, and China Ping An Trust & Investment Co, a subsidiary of Ping An Insurance (Group) Company of China, have agreed to each purchase 50 percent of Fujian Asia Bank, said the two partners Monday.

HSBC will spend not more than US$20 million in cash to buy the Chinese bank's shares from the Indonesian government-backed BCA Finance Ltd, said the global banking giant in a statement.

China Ping An Trust & Investment Co will invest a similar sum in getting 50 percent of Fujian Asia Bank from Bank of China, said Sheng Ruisheng, spokesman of Ping An Insurance Group.

Under the transaction agreement, China Ping An Trust & Investment Co will inject a further US$23 million into Fujian Asia Bank, diluting HSBC's stake to an agreed 27 percent.

Fuzhou-based Fujian Asia Bank will be renamed as Ping An Bank Ltd once the share sale is completed.

The final consideration to be paid by HSBC will be determined at completion, expected by the end of the first quarter of 2004, following a valuation of Fujian Asia Bank's assets, said the statement.

Established in 1993 as a 50-50 joint venture bank, Fujian Asia Bank's assets totaled US$32.7 million at the end of last year.

Meanwhile, the long-term objective of Ping An Bank will be to develop consumer banking business, including credit card and real estate mortgage lending business.

"The new bank's focus on consumer banking business is a remedy to our current services on China's mainland," said Zhang Dandan, a spokeswoman of HSBC China.

HSBC is only allowed to conduct foreign currency-denominated banking services to foreign-funded enterprises, foreigners and residents of Hong Kong, Macao and Taiwan, and renminbi business to Chinese enterprises.

China has pledged to allow overseas bankers to offer local currency services to domestic residents by December 2006.

Meanwhile, the deal enables Ping An Insurance Group, one of China's three largest insurance policy underwriters, to enter the domestic banking industry.

"We are investing in the banking industry according to the domestic related law," said Sheng of Ping An Insurance Group in which HSBC controls 10 percent.

"It is our trust and investment subsidiary that makes the deal, not the parent company," Sheng added.

The purchase comes two weeks after Hang Seng Bank Ltd, a unit of HSBC, agreed to buy 16 percent of Industrial Bank, a Fujian-based joint stock lender, for US$209 million, making it the biggest foreign investor in a Chinese bank.

(Shanghai Daily December 30, 2003)