HSBC Holdings Plc plans to set up an insurance company on the mainland by the end of this year, seeking a fresh revenue source in the rapidly growing economy.

Without specifying the form of insurance business HSBC had in mind, the executive director of Hongkong and Shanghai Banking Corp, Peter Wong, said yesterday that the London-based lender was looking for a partner for its mainland venture.

"We plan to set up an insurance company and we are seeking partners," Wong said on the sidelines of a banking conference. He expected the new company to be founded by the end of 2006.

Hongkong and Shanghai Banking Corp is the Asia unit of HSBC.

Bank of Communications (BoCom) President Zhang Jianguo had said in March that his bank, the mainland's fifth-largest lender, had plans to start its own insurance company. He, however, had not given a timeframe for the venture. HSBC bought 19.9 per cent of BoCom in 2004.

Asked if BoCom might partner HSBC in the insurance business, Wong replied: "I understand that BoCom hasn't been allowed to do life insurance business now, and we will have different ways at the beginning."

HSBC has invested in the mainland's Ping An Insurance (Group) Co, too, buying nearly 20 per cent of its stakes. Wong declined to comment even on Ping An Insurance as a possible HSBC partner in its insurance venture.

Emerging markets

The mainland's insurance sector has been expanding as Beijing dismantles a cradle-to-grave welfare system, with life insurance premiums rising by 14.2 per cent to 364.62 billion yuan (US$45.5 billion) in 2005.

Beijing is scheduled to open up its banking sector further to overseas competition by the end of this year, with HSBC already being one of the biggest overseas foreign investors. In addition to its stake in BoCom, HSBC purchased 8 per cent of Bank of Shanghai, a small lender, in December 2001.

The British bank opened an asset-management joint venture in Shanghai this year that has raised about US$370 million for its first fund, launched in April.

HSBC is also keen to expand in the mainland's brokerage business, Wong said.

"We are in talks with more than three mainland securities companies, but we also realize Chinese regulators recently halted approval for new securities ventures," he said without naming the companies.

HSBC has had no preference among the possible securities industry partners so far, Wong said, and the lender would work with BoCom on the issue, which might eventually lead to the creation of a new joint venture securities house.

Industry sources said HSBC, along with BoCom, was among a group of foreign bidders, including Credit Suisse, vying for a stake in mid-sized Xiangcai Securities in late 2005.

Reuters

(HK Edition 06/08/2006 page3)