* HSBC aims to hire 4,000 new staff in Pearl River Delta
* Its 114 PRD branches dwarfed 10-1 by local rivals
* HSBC hamstrung by tighter rules on new customer checks
* Bank says branch numbers, footfall not adequate measure
By James Pomfret, Lawrence White and Sumeet Chatterjee
DONGGUAN, China/LONDON/HONG KONG, April 27 In
the digital age, footfall in bricks-and-mortar outlets is an
incomplete measure of business activity, but HSBC's
empty branches in the Pearl River Delta (PRD) suggest it's not
all plain sailing for the bank's expansion in mainland China.
HSBC, the world's sixth-largest bank by assets, announced in
2015 that it would hire 4,000 new staff and invest billions to
make the Pearl River Delta (PRD) its gateway to China, a retail
and corporate banking push that bet on a tech boom,
infrastructure spending and a growing middle class.
It is, as Chief Executive Stuart Gulliver reminded
shareholders in Hong Kong on Monday, a key plank of the bank's
global strategy to improve profits by focusing on markets with
stronger economic growth. PRD already generates more than 10
percent of China's GDP and over a quarter of its exports.
On the ground, HSBC still has a mountain to climb.
In a rundown mall in Houjie, a factory town in the urban
sprawl of Dongguan, the HSBC branch stands out with its bright
posters and smiling receptionist, but only a handful of
customers an hour crossed the threshold during a Reuters visit
At the nearby Industrial and Commercial Bank of China
(ICBC) branch in Changan, dozens rolled up in a
Large local rivals in the PRD, most state-backed, each have
more than 1,000 branches to HSBC's 114 including Guangdong, and
they don't have the headache of the tough compliance rules that
HSBC has to follow to safeguard its international business.
It's a headache the bank has to pass on to prospective
A factory owner who gave his surname as Luo said he opened
an HSBC account last year to facilitate his business making
wooden floorboards and panels for clients in Hong Kong, where
HSBC was founded in 1865.
Luo, who spoke to Reuters as he was leaving the Houjie
branch, represents the kind of affluent Chinese customer with
business in Hong Kong that the bank is keen to snag.
But opening a bank account was "quite a lot of trouble", he
said, and took nearly two weeks.
HSBC's customer-checking procedures have got tighter in
recent years after it was hit with billions of dollars in fines
in the U.S. for lapses in anti-money laundering controls.
A HSBC staff member at the branch, who declined to be named,
confirmed that customer background checks can take longer than
at local banks that have no or negligible U.S. business at risk
and are not subject to global regulatory scrutiny.
HSBC says it is pleased with its progress in China. At the
start of April it had 150,000 credit cards in circulation,
having begun to issue them in December, mostly after digital
It has also launched online trading and banking over social
media platform WeChat.
"We do not intend to compete on a traditional basis in PRD.
Absolute branch numbers and footfall will not be our measure,"
said Kevin Martin, HSBC's Asia Pacific head of retail banking
and wealth management.
But that's a game its big rivals are also playing; ICBC, for
example, has offered WeChat banking since 2013.
Since HSBC announced its strategy in June 2015, China's
slowing growth and a stock market crash have prompted a rethink
on the pace of expansion.
CEO Gulliver said last year it would take on the 4,000 new
regional hires over five years, not three, as initially planned.
"Quite rightly, management felt at that time they didn't
want to achieve the strategy by taking on more risk," Sam
Laidlaw, an independent board member at HSBC, told Reuters.
Investors remain broadly positive.
"It's not an overnight thing, and of course everyone wants
it to be faster. The (China) strategy should be pursued – but it
is only one of many strategies for HSBC," said Hugh Young,
Singapore-based fund manager at Aberdeen Asset Management,
HSBC's 6th-largest shareholder.
And what figures the bank has disclosed for 2016 are
encouraging, albeit from a low base; it said in its annual
report that its number of retail banking and wealth management
clients and its mortgage loan book in the area had both
increased by 51 percent during the year.
But it also has some battles with red tape to win.
The lender is still waiting for approval for its securities
business venture with a state-owned fund in the PRD, more than a
year after it announced the partnership.
And some say the bank remains something of an outsider.
At the Ling Jia Property Agency, a few metres from HSBC's
Houjie branch, realtor Yi Linfeng said most of his customers use
ICBC for mortgages. None, he says, have ever used HSBC.
"I think they mostly have foreign customers from Taiwan and
(Additional reporting by Carolyn Cohn in London; Editing by