HSBC eyes sale of asset management

SYDNEY - HSBC, the world's second-biggest bank, is in talks to sell its Australian asset-management arm, overseeing A$3.5 billion in funds, to Kerry Packer's Challenger Financial Services Group.

Analysts said a deal, estimated to be worth from A$40 million or less to A$70 million, would allow the British bank to withdraw from a business where it lacked scale, and help Challenger to build fee income in a local industry worth more than A$700 billion.

Challenger, which announced the talks yesterday, said it would advise the market further when details were available.

Packer, Australia's richest man, owns about 23 per cent of Challenger, which had total assets under management and administration of A$28.3 billion at December 31.

HSBC in Australia declined to comment.

Shares in Challenger, which has a market value of about A$1.7 billion, closed up 2.2 per cent at A$3.30.

The Australian funds management industry is worth more than A$700 billion, according to research firm East & Partners.

The country's biggest funds manager, Commonwealth Bank of Australia, has funds under administration of A$117 billion.

With Government-backed compulsory employer pension payments of 9 per cent a year, the country's superannuation industry provides steady growth for the financial services sector that charges fees to manage Australians' future retirement savings.

Analyst Brian Johnson of JP Morgan said that subject to the price of the acquisition being disclosed, the purchase of the HSBC asset made sense for Challenger as the asset had a bias to property and Challenger had spare capacity in its funds operations.

"It fits in well with what Challenger do."

- REUTERS