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Will HSBC's Plan to Go Digital in China Boost Profits?
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HSBC Holdings Plc (HSBC - Free Report) aims to expand its digital banking business in China, the second largest economy of the world, to benefit from its increasing online and mobile spending, according to the Bloomberg news. The company will initially roll out its credit cards in the Pearl River Delta-the Hong Kong based manufacturing hub.
Why the Expansion in China?
Earlier this year, HSBC received the regulatory approval for its mainland offerings in China. Due to the rise in the use of online payment modes by Chinese citizens, the company hopes that they will henceforth use its cards for purchases.
The U.K. based lender, seeks to provide personal lending, wealth management and other services to its new credit-card clients.
Kevin Martin, HSBC’s Asia-Pacific head of retail banking and wealth management, said that, “The cards business is the critical deliverable for us this year. Our ambition in the PRD is to build a full scale, digitally-driven retail banking and wealth-management business and the launch of HSBC-issued credit cards in China is the key to this strategy.”
Moreover, the company’s retail banking and wealth management business accounted for nearly 30% of the bank’s Asian pre-tax profit in the first quarter of 2016, according to the Bloomberg report.
A Step in the Right Direction
HSBC’s initial target will be customers based in Pearl River Delta, the manufacturing hub of China, with a higher economic output than the Netherlands. Further, Pearl River’s customers own two cards each, indicating potential for growth there.
The company plans to use its current partnership with the Bank of Communications Company for issuing its cards. The new cards team in China will include employees who have worked in the Bank of Communications Co., as part of the co-branded card partnership.
Moreover, HSBC will continue collaborating with the Bank of Communications Co. on co-branded cards, investment banking, wealth management and trade finance businesses. Additionally, the cards are being designed to become accessible largely through mobiles, to meet the needs of the modern consumers in China.
Hurdles Along the Path
HSBC faces the threat of stiff competition from Citigroup Inc (C - Free Report) and Bank of East Asia ltd. (BKEAY - Free Report) , both of which received regulatory approval to issue credit cards in China, earlier this year. The market leader, Industrial & Commercial Bank of China Ltd., which had issued a substantial number of credit cards in China last year, also poses a threat.
On the other hand, China’s slowing economy remains a matter of concern.
However, HSBC expects to improve its profits by serving the modern world, which nowadays is hugely dependent on online services.
Currently, HSBC holds a Zacks Rank #5 (Strong Sell).
A better-ranked stock among the foreign banks is Canadian Imperial Bank of Commerce (CM - Free Report) , sporting a Zacks Rank #1 (Strong Buy).
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Will HSBC's Plan to Go Digital in China Boost Profits?
HSBC Holdings Plc (HSBC - Free Report) aims to expand its digital banking business in China, the second largest economy of the world, to benefit from its increasing online and mobile spending, according to the Bloomberg news. The company will initially roll out its credit cards in the Pearl River Delta-the Hong Kong based manufacturing hub.
Why the Expansion in China?
Earlier this year, HSBC received the regulatory approval for its mainland offerings in China. Due to the rise in the use of online payment modes by Chinese citizens, the company hopes that they will henceforth use its cards for purchases.
The U.K. based lender, seeks to provide personal lending, wealth management and other services to its new credit-card clients.
Kevin Martin, HSBC’s Asia-Pacific head of retail banking and wealth management, said that, “The cards business is the critical deliverable for us this year. Our ambition in the PRD is to build a full scale, digitally-driven retail banking and wealth-management business and the launch of HSBC-issued credit cards in China is the key to this strategy.”
Moreover, the company’s retail banking and wealth management business accounted for nearly 30% of the bank’s Asian pre-tax profit in the first quarter of 2016, according to the Bloomberg report.
A Step in the Right Direction
HSBC’s initial target will be customers based in Pearl River Delta, the manufacturing hub of China, with a higher economic output than the Netherlands. Further, Pearl River’s customers own two cards each, indicating potential for growth there.
The company plans to use its current partnership with the Bank of Communications Company for issuing its cards. The new cards team in China will include employees who have worked in the Bank of Communications Co., as part of the co-branded card partnership.
Moreover, HSBC will continue collaborating with the Bank of Communications Co. on co-branded cards, investment banking, wealth management and trade finance businesses. Additionally, the cards are being designed to become accessible largely through mobiles, to meet the needs of the modern consumers in China.
Hurdles Along the Path
HSBC faces the threat of stiff competition from Citigroup Inc (C - Free Report) and Bank of East Asia ltd. (BKEAY - Free Report) , both of which received regulatory approval to issue credit cards in China, earlier this year. The market leader, Industrial & Commercial Bank of China Ltd., which had issued a substantial number of credit cards in China last year, also poses a threat.
On the other hand, China’s slowing economy remains a matter of concern.
However, HSBC expects to improve its profits by serving the modern world, which nowadays is hugely dependent on online services.
Currently, HSBC holds a Zacks Rank #5 (Strong Sell).
A better-ranked stock among the foreign banks is Canadian Imperial Bank of Commerce (CM - Free Report) , sporting a Zacks Rank #1 (Strong Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>