Banking group HSBC has firepower of around $20bn to spend on acquisitions, according to analysts at Collins Stewart.
The bank was rumoured yesterday to be keen on increasing its stake in China's Bank of Communications above the permitted 20%. Discussions with the Chinese government were said to be under consideration.
Alex Potter at Collins Stewart says today in a buy note: "At the time of the purchase of its near 20% stake in BoComm, the agreement included an option to move up to 40%,
dependent on regulatory approvals. The cost would be around $14bn - well within range. Not only would this appease Knight Vinke [an activist investor in HSBC] but also put HSBC in number one position to be the first foreign bank to control a major Chinese financial."
Alternatively, Potter has another suggestion for HSBC: "Don't rule out old-style HSBC distressed purchases. HSBC's frequent modus operandi with M&A has been the purchase of distressed assets (Midland and Household being the main examples). A repeat of this cannot be ruled out and we note that UBS and SocGen now have market caps of just $60bn - hardly a stretch for HSBC."
HSBC is now 23.5p higher at 793p.
Elsewhere the concerted central bank action to increase liquidity in the market seems to be doing the trick. The FTSE 100 is 90.8 points higher at 5719.9 while Wall Street is up around 200 points.
