Regulatory needs impact returns of banks' China units: Barclays

THE China subsidiaries of Hong Kong and Singapore banks are facing low returns due to strict regulatory restrictions and ongoing investment spending, said a Barclays equity research report.

Returns are generally unattractive for foreign banks in China (except for HSBC), even seven to eight years after local incorporation of the mainland banking subsidiary, owing to tough regulatory requirements (slow branch opening and financial limitations) and heavy investment spending (IT, staff and premises).

"We do not expect this to change in the near term," Barclays said yesterday.

The return on equity (ROE) of the Hong Kong and Singapore banks' subsidiaries in China averaged 5.5 per cent last year, compared...

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