When the U.S. banking system was in turmoil earlier this decade, HSBC Holdings had a project on its hands in Buffalo's Marine Midland Bank.
Under the watchful eye of John Bond, the huge international bank holding company cleaned up Marine Midland's portfolio of bad real estate loans and restructured its operations.
The work the $484 billion asset group did in Buffalo is paying off at the end of the decade. While the Asian economy -- HSBC's primary market -- staggers along, HSBC Americas is playing a growing role in group operations.
The group's longtime strategy of diversifying outside Asia -- HSBC bought part of Marine Midland in 1978 and all of it in 1987 -- is paying off this year. HSBC's operations in the United States, Canada, South America and England are outpacing 1997 levels, while profits slowed at the group's Asian banks.
"If we were going to grow, we really had to look at other parts of the world. And the first acquisition we made was Marine Midland Bank . . . Now we've really become a group that is well balanced in terms of assets and income," said Keith R. Whitson, the group's chief executive officer, during a visit to Buffalo this week.
HSBC Americas Inc., which is headquartered in Buffalo and primarily includes Marine Midland Bank, made $249 million during the first half of the year. The figure amounts to about 8.8 percent of the group's total profit.
HSBC Americas threw in 6.7 percent of group profits during the same period last year when it made $231 million. The group's primary profit center is still clearly Hong Kong, where HongKongBank and Hang Seng Bank made a combined $1.28 billion from January through June.
Bond, the former Marine Midland president, is now group chairman. Whitson, HSBC's No. 2 executive, also did a tour in Buffalo from 1990 to 1992.
The group's confidence in Marine Midland appears to be growing. HSBC is in the process of shifting the business of several multinational Fortune 500 clients from HongKongBank to Marine Midland Bank. The loans and other business from HSBC's corporate banking operations will shift to Marine Midland's books.
A division of Marine Midland Bank also clears the wire transfers in U.S. dollars for HSBC's institutional clients, such as other banks, brokerage firms and insurance companies.
This business expanded dramatically in late 1996 when HSBC bought J.P. Morgan's dollar clearing business. Marine Midland now processes about $600 billion of wire transfers every day.
Whitson, a native of England, said the group may look to expand its banking franchise in the United States, but not unless the right deal comes along.
"We look at a lot of proposals, but we're very careful and very choosy. If we're going to make an acquisition, we look for something in the recovery stage where we can step in and make significant improvement," he said.
HSBC's operating income increased during the first half of 1998, but profits were down 16.6 percent. The decline in profits, to $2.6 billion after taxes, was largely attributable to provisions for bad Asian loans. HSBC hiked its provisions for bad and doubtful debt during the six month period to $1.14 billion, an increase of $889 million.
Despite Asia's recent economic crises, the group remains firmly committed to the region, where the Hongkong & Shanghai Banking Corp. was founded in 1865 to finance trade.
"We think that this problem in Asia will be resolved and some of these countries will probably emerge stronger," Whitson said.