Targets mid-cap companies needing a bank with global access
HSBC in national corporate banking push
By Jonathan D. Epstein NEWS BUSINESS REPORTER
Updated: 06/29/08 7:09 AM
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- Greif Inc., which operates this plant in the Town of Tonawanda, has locations in 48 countries and is making HSBC one of its primary banks because of the bank’s international reach.
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Small and mid-sized Buffalo-area businesses are already quite familiar with HSBC Bank USA as a lender with international reach. Now businesses throughout the country are learning that as well.
HSBC is in a push to grow its lending to middle-market businesses nationwide, pushing out from its core New York state market into the Midwest and West Coast by targeting firms that need its international capabilities. Businesses in distant markets that might only have vaguely heard of HSBC are now being contacted out of the blue.
The British-owned bank, the largest in Buffalo, has already opened commercial lending offices in Seattle, Portland, San Francisco, and Los Angeles in the West, in addition to Boston, Greenwich, Conn., New Jersey, Philadelphia, Miami and Washington, D. C. That’s on top of its existing New York state offices.
Most recently, it set up shop in Chicago, where its North American headquarters and massive consumer finance business are based. Since opening just over a year ago, its seven lenders there have been calling on clients in Minnesota, Wisconsin, Indiana, Iowa, Western Michigan and Missouri, in addition to Illinois.
That’s on top of those in markets like Pittsburgh, Cleveland, Columbus, eastern Michigan and eastern Canada that are already served by HSBC bankers in Buffalo. And it’s also eying Texas as another treasure trove of opportunity, even though HSBC is not a household name there.
That growth also reverberates back to the bank’s operations in Buffalo, where underwriting and loan support is managed.
“It’s been a terrific success story for us,” said Joseph V. Saffire, executive vice president of Upstate Commercial Banking, an Amherst native who oversees the Chicago office and Midwestern teams from Buffalo. “Companies are realizing that we’re here and we’re serious.”
The goal is to build scale and broaden its reach by appealing to companies that are increasingly doing more of their business abroad, and need a bank with global access. In its newest markets, the bank is targeting companies with sales between $250 million and about $5 billion, though it helps smaller companies in older markets.
In particular, the bank is eyeing customers in areas with large Hispanic or Asian communities, tapping the brand recognition it enjoys because of its extensive operations in Latin America and Asia.
Parent HSBC Holdings Plc operates in 84 countries and territories, with more than 10,000 offices and 330,000 employees in Europe, the Asia-Pacific region, the Americas, Middle East and Africa.
Besides being one of the world’s largest banks by market value and assets, the Londonbased behemoth is the leading international bank in Asia and especially China, where it was founded in 1865. It’s also No. 2in India, No. 3 in Mexico — with 1,347 branches — and No. 4 in Brazil, with over 1,700 offices. In fact, it operates 4,000 offices in 14 Latin American countries, as a result of a string of acquisitions over 10 years.
And bank executives believe that gives them the experience and capability to help mid-sized businesses that are increasingly facing the challenges of international finance, especially in emerging markets where HSBC is strongest.
“We’ve really been reaching out to demographics where we feel there’s a wellspring of international needs,” said Christopher
P. Davies, senior executive vice president and head of commercial banking for North America, which includes the United States, Canada and Bermuda.
“What we are looking to do is bring to a nationwide market access to international banking in a much broader way. The idea is to make those capabilities available to North American companies whose business needs are becoming more international all the time.”
Greif’s a customer
That’s been the case with industrial packaging manufacturer Greif Inc., which employs 90 at a fibre drum plant in the Town of Tonawanda.
The Delaware, Ohio-based company, formerly Greif Brothers, began working with HSBC after the bank joined 12 other lenders on a $450 million credit line. Greif added HSBC “based on their locations and what they could bring to the table,” said treasurer John K. Dieker. “They were in a lot of the same places that we were in.”
Greif Brothers is a 130-year-old publicly traded company employs about 10,000 in 200 locations in 48 countries, and posts about $3.7 billion in annual sales. It has banking relationships also with Deutsche Bank AG, J. P. Morgan Chase & Co., and Bank of America, but Dieker said Greif’s relationship with HSBC has “been growing and getting stronger” as the company has expanded its business in Latin America and Asia.
HSBC is now one of its primary banks, providing credit, accounts and cash management.
“We don’t have one bank across the world,” Dieker said. “We try to keep a good mix of banks, where we can reach out to various ones based on the strengths in certain regions of the world. Latin America is one region that HSBC has a lot to offer.”
The move by HSBC over the last three to four years mirrors the company’s broader push worldwide in commercial banking, which represented nearly 30 percent of the company’s 2007 pretax profits. Its record profit of $7.1 billion last year was the largest component of Group earnings by business line.
Senior executives have said the goal is “to be the world’s leading international business bank,” and they’ve built it up accordingly. HSBC now offers commercial banking in more than 64 countries, with 7,350 individual commercial bankers serving 2.8 million customers.
Besides loans, HSBC’s services include payments, cash management, insurance, trade finance, wealth management, foreign exchange, and derivatives or similar products. That’s separate from small business banking, which is handled through the retail branches, or corporate banking, which is covered by the global investment bank.
“It’s the biggest commercial banking platform in the world,” Davies said. “Nobody else has quite that footprint.”
More firms export
That’s designed to meet the opportunity. According to the bank’s research and analysis, about 50 percent of middle-market companies are obtaining materials from overseas and even more are exporting. And “those trends appear to be on the upswing,” Davies said.
So HSBC executives target those companies that are active in trade, advising them on how to set up shop in particular countries, helping with global cash management, and financing operations and trade.
“We really focus on the situations where we can bring added value to management, and that’s about giving access to the world in a way that’s pretty much unparalleled,” Davies said. “There seems to be a very positive reception to the offering we’re putting out there.”
The bank has invested significantly in technology and staff to bring the highly sophisticated products offered to the world’s largest multinational corporations down to the level of middle-market firms like Greif, Davies said. That’s particularly true of online cash management and trade services that help firms monitor and administer balances and payments in a manner suited to their needs.
Last year, for example, HSBC added “international banking centres” in 38 more countries for a total of 54 facilities that help customers expand their business across global borders. An integrated computer system that allows customer service staff to see a client’s total relationship worldwide — and manage it from one point — is now available in 63 countries. And customers in 16 countries can open accounts across international borders.
Under Davies, a Britishborn, Oxford-educated banker who formerly ran corporate banking for the Americas, such features are now available for smaller commercial clients in the United States. As a result, HSBC has won accolades from a leading financial publication two years in a row as “the best cash management bank in North America,” helping to build its U. S. reputation and enabling it to grow.
The bank is also capitalizing in the Chicago area on its massive employment base in suburban Mettawa, where a new environmentally friendly headquarters recently opened with a big public relations splash, and about 3,100 employees.
Finally, HSBC is leveraging its strength across the border in Canada, where it’s the seventh-largest bank overall and the largest foreign bank. It’s particularly big in British Columbia and Alberta — which has an oil and gas business like Texas — as well as in Ontario and Qu ebec.
