How Midland Bank went from its Birmingham roots to giant HSBC - Birmingham Post Birmingham Post How Midland Bank went from its Birmingham roots to giant HSBC 18:26, 19 Aug 2011 It is 175 years since Midland Bank opened its doors in Birmingham. Share Get daily news by email It is 175 years since Midland Bank opened its doors in Birmingham. Anna Blackaby looks at how it became one of the biggest names in finance before succumbing to takeover On August 15, 1836 Charles Geach, a former Bank of England employee, set up a bank which would serve the industrialists and merchants of the thriving city known as the Workshop of the World. Sadly, Midland Bank no longer exists in its own right – it was swallowed up by HSBC in the 1990s and the name disappeared in 1999. But the legacy of industrial development that it helped usher in is still visible in the region today.

When Midland Bank opened in Union Street 175 years ago, Mr Geach’s early customers were railway builders, iron founders, engineers, utilities and municipal corporations – the firms that built the foundations of the Industrial Revolution that powered Britain into the Victorian era. John Purser, the Coventry-based honorary secretary of the British Banking History Society, said the establishment of strong local banks went hand in hand with the region’s growing prosperity during that time. “Banking in general has quite a history in Birmingham,” he said. “As well as the Midland Bank being founded in Birmingham, there was also Lloyds Bank, which was originally Taylor and Lloyds, and the only municipal bank in the country, The Birmingham Municipal. “So, from a historical point of view, Birmingham can be said to be the birthplace of important banks that have survived in one form or another up to today. “Obviously, Midland Bank is now part of a much larger global organisation, but in its time it was very important to the development of industry and commerce, not only in Birmingham but the surrounding areas.” Mr Geach’s bank was successful right from the start – in its first year, trading profit totalled more than £3,000.

Just 18 months after it opened its doors, the bank moved to new and larger premises higher up Union Street on the corner of Little Cherry Street. The new site cost £6,300 and even incorporated a house that was intended for Mr Geach’s private use. In the 1830s and 1840s Midland Bank occupied an important niche in Birmingham business, particularly in the discounting of bills of exchange for its customers. From the start, the bank set about growing its branch network to serve the needs of the local economy, originally acquiring Stourbridge Old Bank in 1851 and Nichols, Baker and Crane of Bewdley in 1862, both of which traced their roots back to the 1700s and the very early days of the Industrial Revolution. By the 1860s the bank’s directors realised that business was expanding at such a rapid rate that the Union Street premises would soon become too small to cope. Midland acquired land on the corner of New Street and Stephenson Place and construction work began on the bank’s new head office in 1867, which was completed two years later.

The building still stands today, occupied by Waterstones bookshop. The bank made its first move outside the region in 1891 with the acquisition of the Central Bank of London, which gave the bank a seat in the London Clearing House, and, in 1898, by taking over the City Bank, which provided a London head office. By 1918, under the direction of Edward Holden, the bank had deposits of £335 million and ranked as the largest bank in the world – a position it held for a number of decades. Mr Holden oversaw more than 20 bank amalgamations between 1891 and 1918, and opened new branches throughout England and Wales. He also encouraged the development of Midland’s international business – it was the first British bank to set up a foreign exchange department at this time. In 1907 Midland first established links with The Hongkong and Shanghai Banking Corporation (HSBC). After the Second World War Midland continued expanding its branch network and diversified away from traditional banking by acquiring Forward Trust in 1958, which specialised in instalment finance, leasing and factoring services.

In 1967 it bought a share in Montagu Trust, the owner of Samuel Montagu & Co, the first association between a British clearing bank and a London merchant bank. And in 1972 Midland led a consortium which bought out travel business Thomas Cook. Then in 1987 HSBC took its first stake in the bank, acquiring 14.9 per cent of the firm. Their relationship was sealed in 1992 when HSBC pulled off one of the biggest acquisitions in banking history, taking full ownership of Midland Bank as part of its strategy to gain a foothold in Europe. Mr Purser said: “It’s always sad to see the name of a well-known institution disappear. “But as things change and global importance becomes more significant, we’re very pleased that HSBC through their archives do sterling work to make sure the history is still maintained.” HSBC Holdings plc - Company Profile, Information, Business Description, History, Background Information on HSBC Holdings plc HSBC Holdings plc - Company Profile, Information, Business Description, History, Background Information on HSBC Holdings plc 8 Canada Square United Kingdom Company Perspectives We believe long-term success and good corporate behaviour are linked.

Corporate Social Responsibility has been a vital ingredient in HSBC's 140 years of success. We have always maintained that a company's first social responsibility is to be successful. Success allows us to invest in new products and services for our customers. It enables us to pay the dividends which form an important part of the long-term savings and pension plans of our shareholders. It allows us to contribute to public services through the taxes we pay to governments. It creates jobs for our colleagues and suppliers. History of HSBC Holdings plc A leading international banking group, HSBC Holdings plc (also referred to as the HSBC Group) operates in about 80 countries and offers comprehensive financial services encompassing not only commercial and merchant banking but also capital markets, consumer finance, securities, investments, and insurance. The HSBC Group is increasingly international in nature, despite the group still being centered around the bank from which it evolved (and from which it gained its acronymic name)--The Hongkong and Shanghai Banking Corporation Ltd., the top bank in Hong Kong, known colloquially as HongkongBank. HSBC has 9,500 offices spread out across five continents serving 120 million customers.

While a growing force in many areas of the world, the group is especially notable for its longstanding presence in China, where it has been active since 1865. Its foreign subsidiaries are among the leading banks in Canada, France, Mexico, and other countries. Founding of HongkongBank The history of HSBC begins with the founding of the Hongkong and Shanghai Banking Company, Ltd. in 1865. In the early 1860s, Hong Kong's financial needs were served by European trading houses called "hongs." This system proved increasingly inadequate as the colony's bustling trade--primarily in tea, silk, and opium--burgeoned. By 1864 the first proper banks had been established, but as these were based in London or India and controlled from abroad, there was a growing feeling that a local bank was needed in the colony. Dissatisfaction led to action when it was discovered that a group of Bombay financiers intended to set up a "Bank of China" in Hong Kong, and that this bank, chartered in London, was to offer only a small proportion of its shares to China coast businesses.

Thomas Sutherland, the Hong Kong Superintendent of the Peninsula and Orient Steam Navigation Company, proposed the foundation of a new bank modeled on "sound Scottish banking principles." The proposal was promptly taken up by others of the Hong Kong business community; within days a provisional committee had established a banking cooperative capitalized at HKD 5 million. The move effectively preempted the proposed "Bank of China," whose representative, when he arrived later in Hong Kong, could find no market for his shares. The Hongkong and Shanghai Banking Company Ltd. opened on March 3, 1865, with a second branch inaugurated in Shanghai on April 3. A London office was opened later in the year. Members of the cooperative included American, German, Scandinavian, and Parsee Indian merchant houses, as well as representatives from the Bombay-based David Sassoon & Company and Hong Kong-based Dent & Company. The largest companies in Hong Kong, Jardine Matheson and the American firm Russell & Company, were not represented. The highly favorable response to the bank by foreign interests and compradores (native businessmen who acted as intermediaries with the Chinese community), however, led both to reconsider and join.

An international financial crisis in 1865-66 could have destroyed the bank. Instead, with financial support from its members, the bank took over the operations of failed competitors and hired their staff. Dent, meanwhile, the dominant Hong Kong member of the group, went bankrupt. Instead of hurting the cooperative, however, Dent's failure allowed broader representation by more diverse local interests. Initially, the bank was established under the local Companies Ordinance as the Hongkong and Shanghai Banking Company Ltd. Under the colonial law of the time, a bank had to incorporate either under a royal charter in compliance with the Colonial Banking Regulations or else according to British banking legislation. The bank's founders objected to these options, however, as they had particularly designed their enterprise as a local concern. Eventually a deal was struck with the Treasury whereby the bank (renamed The Hongkong and Shanghai Banking Corporation), under a unique ordinance, could retain Hong Kong headquarters while complying with the Colonial Banking Regulations. Expanding Rapidly in the Late 19th Century HongkongBank expanded rapidly throughout the 19th century.

By 1900, it had branches in Japan, Thailand, the Philippines, Singapore, and the countries now known as Malaysia, Myanmar, Sri Lanka, and Vietnam. In some Asian cities, HongkongBank was the first to usher in principles of modern Western banking and was indeed Thailand's very first bank, printing that country's first bank notes. In the United States and Europe, HongkongBank branches opened in San Francisco in 1875, New York in 1880, Lyons in 1881, and Hamburg in 1889. Except in New York, where a Canadian bank already operated, HongkongBank was the first foreign bank in each of these cities. In Hong Kong, operations experienced a setback in the 1870s when the bank made some unwise investments in local Hong Kong industry--its reserves fell from HKD 1 million to HKD 100,000--but the company soon regained its footing under the leadership of a new chief manager, Thomas Jackson, who brought the bank back to a renewed emphasis on its field of expertise, trade finance.

By the end of Jackson's reign, in 1902, HongkongBank's paid-up capital stood at HKD 10 million, and its published reserves at HKD 14.25 million, with additional estimated inner reserves of HKD 10 million. The bank had, however, developed another lucrative role--that of banker to governments. By the 1880s, HongkongBank was operating in this capacity to the government of Hong Kong and had acquired the Treasury Chest (the British government's military and foreign service) business for China and Japan. In addition, the HongkongBank issued bank notes for Hong Kong and for the Straits Settlements (Singapore and Penang). Since these notes were not, at the time, legal tender, their popularity reflected the public's trust in HongkongBank. Through a powerful compradore in China, the bank established contacts with local officials in Tianjin and Beijing. The bank was later asked to issue a public loan on behalf of the Chinese government, and directed several more in ensuing years.

While some of these loans financed China's war against Japan (1894-95) and the enforcement of peace during internal conflicts such as the Boxer Rebellion in 1900, the bulk was used for infrastructural projects such as railroads, coal mines, and shipping lines. The bank was able to develop a very favorable rapport with the government and business interests in China mainly because it had a widespread presence in China and was incorporated in Hong Kong. By 1910 it was the favored intermediary of the multinational China Consortium, a result of the demonstrated effectiveness of the Bank's London manager, Sir Charles Addis. World Wars Leading to Numerous Difficulties World War I deeply divided the bank, still well represented by both Germans and Britons. The German members of its board, identified in the press as "hostile interests," eventually resigned, marking a more or less permanent end to German participation in the company. Still, the bank's Hamburg office remained open for the duration of the war. The high price of silver after the war led the bank to make a rights issue to finance an expansion. Chief Manager A.G.

Stephen presided over the construction of new facilities in Hankow, Bangkok, Manila, and especially Shanghai, where a new office was opened in 1923. An office opened in Vladivostok in 1918 but was forced to close in 1924, when Russian revolutionary forces completed their consolidation of control over Siberia. The optimism of the early 1920s crashed after 1929 and continued to deteriorate through the 1930s, as Japanese interests moved into China, this time supported by Japanese guns. At first, the Japanese domination of China was limited to the rich hinterlands of Manchuria and consisted mainly of the commercial exploitation of resources. While the bank was permitted to establish offices in the Manchurian cities of Dairen, Mukden, and Harbin, its operations were limited only to foreign trade. Meanwhile, in the rest of China, the bank experienced new competition from an increasingly sophisticated Chinese banking community. At the same time, the bank was losing business from the Philippine government and was discriminated against in Indonesia and Vietnam by Dutch and French colonial authorities.

Despite generous lending and other support tactics for customers involved in rubber and other volatile commodities trades, bank profits continued to deteriorate. In many cases, competitors complained that the bank's extraordinary care "exceeded the limits of prudent lending." The bank was, however, founded on cooperative precepts, and continued to operate on that basis. Still, it was the shareholders who suffered; shareholders' funds fell from £9.1 million in 1918 to £8.6 million in 1940. The number of Hong Kong dollars in circulation, 80 percent of which was printed by the Hongkong and Shanghai Bank, increased from HKD 50 million in 1927 to HKD 200 million in 1940. In effect, the bank backed HKD 160 million of the colony's currency--a dangerous exposure to the local economy, despite transferring the currency from a silver to sterling standard. The bank became involved in an even more unmanageable currency-stabilization effort in Shanghai, from which it eventually had to bow out, turning the scheme over to a government board. The Japanese occupation of China, meanwhile, had become extremely brutal.

Terror bombings, invasion, and a Japanese military riot in Nanking stifled commerce in China and isolated Hong Kong from its Chinese hinterland. Sensing imminent danger, the bank's chief manager, Vandeleur Grayburn, authorized the immediate transfer of silver reserves into sterling assets in London. On December 8, 1940, shortly after completing the transfer, Japanese troops stormed through Hong Kong's New Territories, and on December 25 won a surrender. Bank employees in Manchuria, Japan, and Indochina were repatriated, and those in Burma and Singapore escaped to India. Employees in China, particularly Foochow, managed to reach Chungking, where the bank opened a formal office in 1943. The staff in Hong Kong was much less fortunate; most of them who were of European descent were imprisoned. Under prearranged orders from Grayburn, the bank's London manager, Arthur Morse, assumed managerial control of the bank. Morse transferred the dollar-denominated assets located in Hong Kong to London, fearing that if the Japanese gained control of them, the assets would be frozen by the U.S. government.

In light of the circumstances--the bank's board was interned in Hong Kong--Morse was named both chief manager and chairman. During the occupation, Japanese authorities forced the bank to issue additional currency in order to support the local economy. Grayburn and his designated successor, D.C. Edmonston, meanwhile, died in prison. The war ended so suddenly in August 1945 that Hong Kong remained occupied when Japan surrendered. With colonial authorities back in control, the bank began the difficult and costly task of rebuilding. The amortization of bank notes issued under the occupation cost HKD 16 million, and new legislation only permitted the bank to collect debts from enemy interests in depreciated occupation currencies. Postwar Recovery and Expansion Despite its weakened condition, the bank played a major role in the reconstruction of Hong Kong, a task Morse began planning well before the war ended. All the company's branches were reopened--with the exception of Hamburg which, again, had remained open during the war--including those in Japan. By 1947, however, new problems arose in China, where the wartime alliance between Chiang Kai-shek's nationalists and Mao Tse-tung's communists had degenerated into a civil war.

The immediate effects were severe inflation and increasing public disorder. By October 1949 the communists had gained control of the mainland and the nationalists had fled to Taiwan. When an initial plea by the communists for reconstruction in cooperation with capitalists was suddenly reversed in 1950, industrialists fled China--especially Shanghai--for Hong Kong. The bank maintained offices in Shanghai, Beijing, Tianjin, and Shantou until 1955, when all but the Shanghai branch were closed. The Chinese, it seemed, preferred to do all their business through Hong Kong. After the war, the British government practiced a "non-extractive" economic policy in Hong Kong, which, coupled with the entrepreneurial talent of industrialists transplanted from Shanghai and a labor force swelled by thousands of mainland refugees, created a powerful economic base. The bank financed hundreds of new ventures that helped the colony achieve unprecedented export-led growth. The growth of the textile industry in Hong Kong, however, led the bank to fear that it had become overexposed to that one industry. Under Michael Turner, the HongkongBank adopted a new strategy of expansion using subsidiaries during the mid-1950s.

Initially made necessary by American banking legislation, the subsidiary form of organization was first used in 1955 to establish a branch in California--one step toward reducing its dependence on Hong Kong. Because Britain relinquished much of its empire after the war, British companies were forced to rationalize, by merger, acquisition, or nationalization. Indeed, many went bankrupt. Two such companies, the Mercantile Bank (formerly the Chartered Mercantile Bank of India, London, and China) and the British Bank of the Middle East (known as BBME, formerly the Imperial Bank of Persia), were purchased by the Hongkong and Shanghai Bank in 1959. The addition of the Mercantile Bank, with an extensive branch network in India, and the BBME, strongly represented in the Persian Gulf, made the HongkongBank the largest foreign bank in most of the countries from the Far East to southwest Asia. Having reduced its exposure to Hong Kong, the bank moved next to diversify operationally.

In 1960 it created Wayfoong, a consumer financing group whose name translates loosely as "focus of wealth." A banking crisis in Hong Kong in 1964 led to a serious run on a competitor, the Hang Seng Bank. As the primary financial institution in Hong Kong and de facto central bank, the HongkongBank, while under no statutory duty to do so, acquired a majority interest in Hang Seng in 1965. Hang Seng subsequently recovered, and was the second largest bank incorporated in Hong Kong into the 1990s. The HongkongBank's expansion through subsidiaries began in earnest with the creation in 1972 of Wardley Ltd., a merchant bank, and an insurance company called Carlingford. The bank also made numerous other investments--in Cathay Pacific Airways, the World-Wide shipping group, and the South China Morning Post. All these investments proved highly profitable in light of Hong Kong's rapid economic growth. In addition, the BBME benefited greatly from the newly prosperous oil-based economies in the Persian Gulf.

In 1978, however, BBME branches in Saudi Arabia were taken over by the Saudi British Bank, a Saudi-controlled bank in which BBME retained management control, but only 40 percent ownership. Under the leadership of Michael Sandberg, the HongkongBank reexamined its position in America as part of a wider strategy to gain greater representation in the major Western economies. The Hongkong and Shanghai Bank of California was sold and the bank purchased a 51 percent share of Marine Midland Bank, a Buffalo, New York-based bank holding company, in 1980. The HongkongBank bought the outstanding shares of Marine Midland in 1987. This acquisition inspired substantial debate in the U.S. Congress about whether banking laws should be strengthened to prevent foreign companies from gaining control over American banks. The bank expanded in several ways during 1980. In China, the Shanghai branch was expanded and a representative office was established in Beijing. In addition, the BBME relocated from London to Hong Kong, and the bank gained control of Concord International, a leasing and finance group, and Anthony Gibbs, a British merchant bank.

The following year, a Canadian subsidiary, the Hongkong Bank of Canada, was established in Vancouver. In 1986 the Hongkong Bank of Canada acquired the business of the Bank of British Columbia, bringing the number of branches across Canada to 61. A bidding war over the Royal Bank of Scotland Group between the HongkongBank and Standard & Chartered (issuer of Hong Kong's other currency) was halted in 1981 by the British Monopolies & Mergers Commission, which ruled against both bids. Meanwhile, the bank succeeded in establishing a presence in Africa in 1981 through the acquisition of a controlling interest in Equator Bank by its merchant bank subsidiary Wardley; in Cyprus in 1982, also primarily through Wardley; and in Australia in 1985, when it established HongkongBank of Australia. Back in North America, HongkongBank entered into a strategic alliance with California-based Wells Fargo Bank in 1989. Also that year, HongkongBank was registered under the Hong Kong Companies Ordinance, at which time it adopted the name The Hongkong and Shanghai Banking Corporation Ltd.

HongkongBank's expansionist policies were not always successful. Its acquisition of Marine Midland, said initially to have boosted the bank's assets from HKD 125.3 billion to HKD 243 billion, soon proved a debacle. Ill-advised forays into real estate and Latin American lending led to significant losses, prompting the parent company in 1991 to completely overhaul its subsidiary--at a purported cost of $1.8 billion. Other high-profile failures of the 1980s included the bank's financing of an Australian tycoon, Alan Bond, who went bankrupt. Forming HSBC Holdings plc in 1991 In 1984 Great Britain and the People's Republic of China signed a historic agreement, slating for July 1, 1997, the return of Hong Kong to Chinese control, and providing added impetus to HongkongBank's overseas expansion. Keen to beef up its presence in Europe, the bank acquired James Capel, a leading U.K. securities firm, in 1986.

Of still greater importance was the beginning in December 1987 of an association between HongkongBank and Midland Bank, one of four major British clearing banks. In December 1987 HongkongBank made the friendly acquisition of 14.9 percent of Midland's stock, agreeing not to increase its stake in Midland until the expiration of a three-year agreement in December 1990. Staking its future in Europe to that of Midland, HongkongBank transferred control of its branches on the European continent to Midland and in turn acquired Midland's branches in Canada and South Korea. In 1990 Hongkong Bank of Canada expanded still further through the purchase of Lloyds Bank Canada, becoming the seventh largest bank in Canada by the early 1990s. HongkongBank and Midland entered into merger talks in 1990, but the talks broke off late in the year because of what were termed "financial difficulties." Nevertheless, HongkongBank held onto its stake in Midland following the expiration of the three-year agreement.

Like many Hong Kong-based companies facing the uncertainties of 1997, HongkongBank made some major organizational changes well before the handover. In 1991 it created a new holding company, HSBC Holdings plc, making HongkongBank a subsidiary of the U.K.-incorporated but Hong Kong-based HSBC Holdings. HSBC stock was set up on both the London and Hong Kong markets, showing the importance HongkongBank placed on Europe (and London) for its future. For HongkongBank, the establishment of a new holding company relieved it of management responsibility for the group's more than 500 subsidiaries in 50 countries. The bank thus could focus primarily on the Asia-Pacific region it knew so well. HSBC completed the long-anticipated takeover of Midland in 1992, gaining full control of what became its flagship in Europe. HSBC made an initial friendly offer in March for Midland. The following month Lloyds stepped in with a larger, hostile offer. HSBC soon put an end to the takeover battle with a 480p per share offer in June, prompting Lloyds to bow out.

HSBC ended up paying £3.9 billion ($7.2 billion) to acquire Midland. As a condition of the acquisition, HSBC was required by the regulatory Bank of England to move its main office to London, which it did in January 1993. The headquarters of HongkongBank remained in Hong Kong. The acquisition of Midland was a coup, providing HSBC with the significant presence in Europe it had previously lacked. Variously described as a merger and a takeover, the amalgamation virtually doubled HSBC's assets (from £86 billion to £170 billion) and workforce. The venerable Midland, the U.K.'s third largest bank, was not performing to standard at that time, being the least profitable of Britain's "big four" banks. Nevertheless, the financial health and the international experience of the parent company began attracting larger corporate customers to Midland. In addition, many individuals were subsequently won over by the telephone banking service, First Direct, introduced by Midland in 1989 and strongly backed by HSBC. HSBC's lead in technology--used, for example, to automate credit decisions and limit staff expenditure--also played a part in Midland's recovery.

Although under the HSBC umbrella structure individual subsidiaries acted, in large part, autonomously, the company also moved to coordinate some operations. Soon after the takeover of Midland, HSBC integrated its treasury operations in London, New York, and Tokyo and established common technological standards. Also in 1992 HSBC opened a trading room in London for the dealing business of Midland, James Capel, and HSBC Greenwell. This became the largest treasury trading operation in Europe. That year also saw the establishment of the HSBC Investment Banking Group, which coordinated the merchant banking, securities, and asset management business (HSBC Asset Management) of the entire HSBC Group. HongkongBank, which had long acted as a quasi-central bank, was relieved of some of these unofficial duties in 1992, when the Hong Kong Monetary Authority was established. The following year HongkongBank divested its holding in Cathay Pacific Airways. In 1994 it became the first foreign bank to incorporate locally in Malaysia through the establishment of Hongkong Bank Malaysia Berhad.

In the mid-1990s the bank greatly expanded its personal banking business through the opening or upgrading of personal banking units in Australia, Bangladesh, Brunei, Hong Kong, Indonesia, Mauritius, New Zealand, the Philippines, Saipan, Singapore, Sri Lanka, Taiwan, and Thailand. The bank also expanded its presence in China during this period, maintaining good relations with the Chinese government--which was extremely important as 1997 approached. HSBC Holdings continued to expand in the mid-1990s under the leadership of Chief Executive John Bond. In 1995 HSBC and Wells Fargo established Wells Fargo HSBC Trade Bank in California, a joint venture (40 percent owned by HSBC) providing trade finance and international banking services in the United States. Marine Midland was bolstered in 1996 with the acquisition of Rochester, New York-based First Federal Savings and Loan Association for $620 million.

Latin America was the subject of several 1997 transactions: the purchase of a 10 percent stake in Banco del Sur del Peru; the founding of a new subsidiary in Brazil, Banco HSBC Bamerindus S.A., which took over assets of Banco Bamerindus do Brasil; the increase in investment in Banco Santiago in Chile to 6.99 percent; the acquisition of Roberts S.A. de Inversiones of Argentina (renamed HSBC Roberts S.A. de Inversiones); and the purchase of a 19.9 percent stake in Grupo Financiero Serfin of Mexico. Although HSBC seemed to suffer no ill effects from the handover of Hong Kong to Chinese control on July 1, 1997, it did feel the effects of the Asian economic crisis of the late 1990s. The group was particularly hard hit in troubled Indonesia, where it had to set aside about $2.5 billion in provisions for bad loans. Nevertheless, its earlier moves into Europe and the Americas paid off handsomely, as higher profits in these regions helped offset weaker results in Asia.

Meantime, the Hong Kong Monetary Authority, in an attempt to thwart currency speculators, made a significant intervention in the Hong Kong Stock Market in August 1998, purchasing large stakes in several prominent companies. The government of Hong Kong thereby became HSBC Holdings' single largest shareholder, with an 8.9 percent stake. In October 1998 HSBC announced that it had signed a 999-year lease for a new 1.1 million-square-foot headquarters building at Canary Wharf in London, scheduled for completion by early 2002. The following month HSBC said that it would unify the HSBC Group under the HSBC name and logo, thereby establishing a more global corporate identity. Among the units whose marketing names would change to HSBC were Banco HSBC Bamerindus, the British Bank of the Middle East, Hongkong Bank Malaysia, Hongkong Bank of Australia, Hongkong Bank of Canada, HSBC Banco Roberts, Marine Midland, Midland Bank, HSBC Equator Bank, HSBC Investment Banking, and even the flagship HongkongBank itself. Eventually the legal names of many HSBC Group subsidiaries would also be changed.

In a press release, Bond said: "We want the HSBC brand to be known in every country and in every sector in which we operate as synonymous with integrity, trust, and excellent customer service. I am confident that a unified brand and the strong recognition it will bring for HSBC's exceptional strengths is an important step forward as we work to maximise shareholder value." The implementation of this significant change was sure to require much of HSBC's attention at the onset of the 21st century. HSBC shares began trading on the New York Stock Exchange in 1999. Later in the year, the group bought Republic New York Corporation and Safra Republic Holdings S.A. Acquisitions also were giving HSBC a considerable presence in Europe. The company bought Crédit Commercial de France (renamed CCF S.A. and ultimately HSBC France) for $11 billion in 2000. CCF had been formed in 1894 and operated 650 branch offices. In July 2000, when the deal closed, HSBC shares began trading on the Paris Stock Exchange.

HSBC bought out Australia's NRMA Building Society Ltd., Turkey's Demirbank, and Taiwan's China Securities Investment Trust Corporation in 2001. It also was picking up minority shares in others such as the Bank of Shanghai and Ping An Insurance Company, China's second largest insurance provider. Ping An underwent an initial public offering in 2004, diluting HSBC's stake to about 10 percent, but in August 2005 raised its holding to 19.9 percent at a cost of $1 billion. "The World's Local Bank" in 2002 The company spent about $2 billion in 2002 to buy and recapitalize Mexico's Grupo Financiero Bital. HSBC gained 5.5 million new customers at 1,400 new branches. During the year, HSBC began billing itself as "The world's local bank." HSBC opened its impressive new headquarters at London's Canary Wharf in April 2003. About 8,000 employees were based there. Part of HSBC's sensitivity to local cultures included support of environmental causes such as the World Wildlife Fund.

In December 2004, the company became the first bank to set the goal of becoming "carbon neutral," a status it achieved within a year. In 2003, the group made a major acquisition in the United States, taking over Household International Inc., which had more than 1,300 branches and 53 million consumer finance and credit card customers. In Brazil, HSBC also bought a leading consumer finance company, Losango Promotora de Vendas Limitada, as well as Banco Lloyds TSB S.A.-Banco Múltiplo. Among other 2003 deals was the purchase of Keppel Insurance Pte Ltd., which supplied insurance in Singapore. The mergers and acquisitions activity continued in 2004, adding the Bank of Bermuda Ltd. and Marks and Spencer's Retail Financial Services Holdings Ltd. (d/b/a M&S Money). By this time, most of the group's existing subsidiaries had changed their names to include the HSBC initials. Household International, renamed HSBC Finance Corporation, and others were combined into the HSBC North America unit. China was the hub of much of the group's investment activity in 2005.

While raising its holding in Ping An Insurance, it also bought a 19.9 percent stake in Bank of Communications Ltd. HSBC was also opening new bank branches. In March 2005, its Beijing branch began providing local currency services, a first for a foreign bank. Elsewhere in the world, U.S. credit card issuer Metris Companies Inc. was acquired by HSBC Finance for $1.6 billion in December 2005. The group's chairman since 1988, Sir John Bond, was retiring in May 2006. He was leaving a much larger company than the one he had joined. HSBC posted pretax profits of $21 billion in 2005, up 11 percent from the previous year. Total assets were $1.5 trillion (£873 billion; HKD 11.65 trillion). The group employed a virtual army of 265,285 employees worldwide, serving nearly 100 million customers. Principal Subsidiaries The Bank of Bermuda Ltd.; Hang Seng Bank Ltd.

(Hong Kong; 62.14%); HFC Bank Ltd.; HSBC Asset Finance (UK) Ltd.; The Hongkong and Shanghai Banking Corporation Ltd. (Hong Kong); HSBC Bank A.S. (Turkey); HSBC Bank Argentina S.A. (99.99%); HSBC Bank Australia Ltd.; HSBC Bank Brasil S.A. - Banco Múltiplo; HSBC Bank Canada; HSBC Bank Egypt S.A.E. (94.53%); HSBC Bank Malaysia Berhad; HSBC Bank Malta plc (70.03%); HSBC Bank Middle East Ltd. (Jersey); HSBC Bank plc; HSBC Bank USA, N.A.; HSBC La Buenos Aires Seguros S.A. (Argentina; 99.53%); HSBC Finance Corporation (United States); HSBC France (formerly CCF S.A.) (99.99%); HSBC Guyerzeller Bank AG (Switzerland); HSBC Insurance (Asia) Ltd. (Hong Kong); HSBC Insurance Brokers Ltd.; HSBC Investments (Taiwan) Ltd.

(formerly HSBC Asset Management (Taiwan) Ltd.); HSBC Investments (UK) Ltd. (formerly HSBC Asset Management (Europe) Ltd.); HSBC Life (International) Ltd. (Bermuda); HSBC Life (UK) Ltd.; HSBC Private Bank (Guernsey) Ltd. (Guernsey); HSBC Mexico S.A. (99.74%); HSBC Private Bank (Suisse) S.A.; HSBC Private Bank (UK) Ltd.; HSBC Securities (USA) Inc.; HSBC Seguros (Brasil) S.A. (97.92%); HSBC Technology & Services (USA) Inc.; HSBC Trinkaus & Burkhardt KGaA (Germany; 77.89%); Maxima S.A. AFJP (Argentina; 59.99%). Principal Divisions Europe; Hong Kong; Rest of Asia-Pacific, including the Middle East and Africa; North America; South America. Principal Operating Units Grupo Financiero HSBC, S.A. de C.V.

(99.8%); HSBC Bank plc; HSBC France (Netherlands); HSBC Insurance Holdings Ltd.; HSBC Investment Bank Holdings plc; HSBC Latin America Holdings (UK) Ltd.; HSBC North America Holdings Inc. Principal Competitors Lloyds TSB Group plc; Barclays plc. Chronology 1865 Hongkong and Shanghai Banking Company, Ltd. is established. 1918 Shareholders' funds are £9.1 million. 1940 The Japanese occupy Hong Kong during World War II. 1950 Mainland industrialists flee the communists to Hong Kong. 1959 HSBC buys London's Mercantile Bank and the British Bank of the Middle East. 1960 The bank forms the Wayfoong consumer financing group. 1972 Merchant bank subsidiary Wardley Ltd. is established. 1980 The California subsidiary is divested; HSBC acquires control of Buffalo, New York's Marine Midland Bank. 1991 Holding company HSBC Holdings plc is formed. 1992 Midland Bank, the United Kingdom's third largest, is acquired for £3.9 billion ($7.2 billion).

1997 The United Kingdom transfers control of Hong Kong to the People's Republic of China. 2000 HSBC acquires venerable Crédit Commercial de France (CCF) for $11 billion. 2002 Mexico's Grupo Financiero Bital is acquired and recapitalized for $2 billion. 2003 A new headquarters is opened; Household International of the United States is acquired. 2004 HSBC acquires Bank of Bermuda and Marks & Spencer's retail financial services unit. 2005 Total assets are $1.5 trillion. Additional Details Incorporated: 1865 as Hongkong and Shanghai Banking Company, Ltd.

Employees: 265,285 Total Assets: $1.50 trillion (2005) Stock Exchanges: London Hong Kong New York Paris Bermuda Ticker Symbols: HSBA; 005; HBC; PHSB NAIC: 522110 Commercial Banking; 522120 Savings Institutions; 522292 Real Estate Credit; 522293 International Trade Financing; 523110 Investment Banking and Securities Dealing; 523920 Portfolio Management; 523930 Investment Advice; 523991 Trust, Fiduciary, and Custody Activities; 524110 Direct Life, Health, and Medical Insurance Carriers; 551111 Offices of Bank Holding Companies Further Reference Blanden, Michael, "After the Dust of Battle," Banker, August 1992, p. 36. Chambers, Gillian, Hang Seng: The Evergrowing Bank, Hong Kong: Hang Seng Bank, 1991.

Collis, Maurice, Wayfoong: The Hong Kong and Shanghai Banking Corporation, London: Faber and Faber, 1965. "An Empire at Risk," Economist, September 7, 1996, pp. 71-72. Engardio, Pete, "Global Banker," Business Week, May 24, 1993, pp. 42-46. Engardio, Pete, and Paula Dwyer, "Hongkong & Shanghai vs. the World," Business Week, August 7, 1995, pp. 59-60. "Far Eastern Promise and the Global Gamble," Investors' Chronicle, January 29, 1993. Graham, George, "HSBC Reaps Fruits of Growth Strategy," Financial Times, February 24, 1998, p. 26. "Greater Than the Sum of His Parts," Financial Times, March 1, 1994. Green, William, "Bland--And Proud of It," Forbes, July 7, 1997, pp. 94-96, 98-99.

Holmes, A. R., and Edwin Green, Midland: 150 Years of Banking Business, London: Batsford, 1986. "HongkongBank's Global Gamble," Economist, March 21, 1992, pp. 107-08. "Hong Kong/China Boom Spawns a Global Banking Colossus," QL Stockmarket Letter, July 1, 1993. "HSBC Maps Strategy for US Market," South China Morning Post, January 14, 1993. Irvine, Steve, "The Culture That Powers Hongkong Bank," Euromoney, February 1997, pp. 44+. Jones, Geoffrey, The History of the British Bank of the Middle East, 2 vols., Cambridge: Cambridge University Press, 1986-87. King, Frank H. H., The History of the Hongkong and Shanghai Banking Corporation, 4 vols., Cambridge: Cambridge University Press, 1987-91.

------, The Hongkong Bank in the Period of Development and Nationalism, 1941-1984: From Regional Bank to Multinational Group, New York: Cambridge University Press, 1991. King, Frank H. H., ed., Eastern Banking: Essays in the History of the Hongkong and Shanghai Banking Corporation, London: Athlone Press, 1983. King, Frank H. H., Catherine E. King, and David J. S. King, The Hongkong Bank Between the Wars and the Bank Interned, 1919-1945: Return from Grandeur, New York: Cambridge University Press, 1988. ------, The Hongkong Bank in Late Imperial China, 1864-1902: On an Even Keel, New York: Cambridge University Press, 1987. King, Frank H. H., David J. S. King, and Catherine E.

King, The Hongkong Bank in the Period of Imperialism and War, 1895-1918: Wayfoong, the Focus of Wealth, New York: Cambridge University Press, 1988. Leung, James, "HongkongBank Extends Personal Touch," Asian Business, February 1997, p. 22+. "Loan Masters," Economist, August 28, 1993, pp. 65-66. Lucas, Louise, "Hongkong Bank Chief to Quit in HSBC Rejig," Financial Times, October 16, 1998, p. 25. ------, "Profits Growth Limited at HongkongBank," Financial Times, August 5, 1997, p. 20. Meyer, Richard, "Lessons from Buffalo," Financial World, July 23, 1991, pp. 37-39. Morris, Kathleen, "Back to the Future," Financial World, June 20, 1995, pp. 42-44.

Muirhead, Stuart, Crisis Banking in the East: The History of the Chartered Mercantile Bank of India, London and China, 1853-93, Aldershot, England: Scolar Press, 1996. Sender, Henny, and John McBeth, "Living Dangerously: Hongkong Bank Is Mired in an Indonesian Nightmare," Far Eastern Economic Review, February 29, 1996, pp. 52-53. Silverman, Gary, "Look British, Think Chinese: Hongkong Bank Stays No. 1," Far Eastern Economic Review, December 28, 1995, pp. 64-65. Tanzer, Andrew, "The Bank," Forbes, December 11, 1989, pp. 43-44. Vander Weyer, Martin, "Hongkong Officer Corps Builds a Global Empire," Euromoney, April, 1993, pp. 52-56. "Waiting for the Griffin to Pull Its Weight," Financial Times, March 16, 1993.

"You Organise Your Bank Around Your Customers," Daily Telegraph, March 22, 1993. "Your Future Is Our Future," Hong Kong: The Hongkong and Shanghai Banking Corporation Ltd., 1997. User Contributions: Comment about this article, ask questions, or add new information about this topic: Name: HSBC's history | HSBC Holdings plc Read more The inspiration behind the founding of the bank was Thomas Sutherland, a Scot who was then working for the Peninsular and Oriental Steam Navigation Company. He realised that there was considerable demand for local banking facilities in Hong Kong and on the China coast, and he helped to establish the bank which opened in Hong Kong in March 1865 and in Shanghai a month later. Soon after its formation, the bank began opening branches to expand the services it could offer customers. Although that network reached as far as Europe and North America, the emphasis was on building up representation in China and the rest of the Asia-Pacific region. HSBC was a pioneer of modern banking practices in a number of countries – for instance, in 1888 it was the first bank to be established in Thailand, where it printed the country's first banknotes.

From the outset trade finance was a strong feature of the local and international business of the bank, an expertise that has been recognised throughout its history. Bullion, exchange, merchant banking and note issuing also played an important part. In 1874, the bank handled China's first public loan and thereafter issued most of China's public loans. By the end of the century, after a strong period of growth and success under the leadership of Thomas Jackson (chief manager for most of that period from 1876 to 1902), the bank was the foremost financial institution in Asia. Challenges and change The 20th century saw challenges and change for HSBC. In the early years of the 20th century, HSBC widened the scope of its activities in the East. It became increasingly involved in the issuing of loans to national governments, especially in China, to finance modernisation and internal infrastructure projects such as railway building. The First World War brought disruption and dislocation to many businesses, but the 1920s saw a return to prosperity in the East as new industries were developed and trade in commodities such as rubber and tin soared.

The bank's new head office in Hong Kong (1935) and the new buildings at major branches such as Bangkok (1921), Manila (1922) and Shanghai (1923) reflected this confidence. The 1930s ushered in an era of uncertainty with economic recession and political turmoil in many of the bank's markets. In the Second World War, the majority of the bank's staff in the East became prisoners of war as the enemy advanced through Asia. The bank survived under the new leadership of Arthur Morse, and through its prudent policy of building up large reserves in peace time. At the end of the war, HSBC took on a key role in the reconstruction of the Hong Kong economy. Its support for the skills of newcomers to Hong Kong was especially vital to the upsurge in manufacturing in this period. In other markets, however, HSBC needed to make major readjustments. Most of the mainland offices in China were closed between 1949 and 1955, leaving only the Shanghai office to continue its long and eventful service. These changes carried the risk that the bank was over-concentrating its interests in Hong Kong.

The bank addressed this concern by diversifying through a series of alliances and acquisitions. The purchases of the Mercantile Bank and the British Bank of the Middle East in 1959 took HSBC into new pastures, and the formation of a merchant banking arm in 1972 extended its range of services. By the 1970s the bank had firmly developed a policy of expansion by acquisition or formation of subsidiaries with their own identities and expertise. Making of the modern HSBC In the later years of the 20th century HSBC moved from an important regional bank to one of the world's leading financial services organisations. This transition was achieved by a number of steps. By the late 1970s HSBC's management had conceived the strategy of the 'three-legged stool' with the legs of the stool representing the three markets of the Asia-Pacific region, the USA and the UK. In the 1980s, the purchase of Marine Midland Bank in the USA represented the acquisition of the second leg of the stool. HSBC then sought a similar purchase in the UK.

The initial target was the Royal Bank of Scotland but after this acquisition failed, attention turned to Midland Bank and a 14.9 per cent stake was taken in 1987. After creating a new holding company, HSBC Holdings plc in 1991, HSBC then made a recommended offer for full ownership of Midland in July 1992. The third leg was in place. As a result of the formation of the new holding company and the acquisition of Midland Bank, HSBC became headquartered in London. HSBC continued to grow through a number of acquisitions across the globe. In November 1998, HSBC announced the adoption of a unified brand, using HSBC and the hexagon symbol everywhere it operated, with the aim of enhancing recognition of HSBC by customers, shareholders and staff throughout the world. In the 21st century, HSBC has renewed its focus on its birthplace, growing its business in China both organically and through a series of strategic partnerships. HSBC's diversification and its core values of financial strength and stability have stood it in good stead in the recent global turbulence in economies and markets, and it remains well placed to deal with an uncertain world.

More about HSBC’s history Midland Bank plc - Company Profile, Information, Business Description, History, Background Information on Midland Bank plc Midland Bank plc - Company Profile, Information, Business Description, History, Background Information on Midland Bank plc 27-32 Poultry United Kingdom History of Midland Bank plc Midland Bank plc is one of the leading deposit banks in the United Kingdom. Following its heyday in the first half of the 20th century, when it was the largest bank in the world, Midland flirted with disaster in the 1980s due to an ill-conceived international expansion and then recovered some of its luster after its acquisition by HSBC Holdings plc. Rapid Growth in the 19th Century through Acquisitions The Birmingham & Midland Bank was founded in 1836 as a joint-stock company. The leading figure among its founders was Charles Geach, a 28-year-old Bank of England clerk stationed in Birmingham who quit his job to become the new institution's general manager, which he remained until his death in 1854.

Midland's starting capital was a very modest £28,000, but the bank quickly proved to be a successful enterprise. It prospered until 1851, when it acquired Bates & Robins, a Stourbridge private bank. In 1862 it added Baker & Crane, another private bank. These two acquisitions marked the beginning of a long series of amalgamations that would turn Midland into a banking powerhouse by the early years of the next century. Despite its early success, Midland remained a relatively small institution for the next 20 years, its operations limited to Birmingham and the immediate area. But the bank expanded in the 1880s, beginning with the acquisition of Union Bank of Birmingham in 1883. Amalgamation with Coventry Union Banking Company and Leamington Priors & Warwickshire Banking Company followed in 1889, as well as Derby Commercial Bank, Leeds & County Bank, and Exchange & Discount Bank, Leeds in 1890. Edward Holden became Midland's general manager in 1891, and it was under his guidance that the bank experienced its greatest rise in stature.

Perhaps the most momentous decision of his career as the head of Midland was also one of his earliest: in 1891, Midland acquired Central Bank of London. In one leap, the bank transformed itself from a provincial institution with a presence limited to the industrial Midlands to one with nationwide ambitions and a strong presence in the financial capital of the world. Midland moved its headquarters to London that year and renamed itself London & Midland Bank (it would drop the first half of the name in 1923, giving it its current form). A further wave of acquisitions in the 1890s established Midland's presence throughout England, from the Scottish border in the North to the Channel Islands in the South. By 1898, it had 250 branches in England and Wales and £32 million in deposits. Holden's expansion policy was nothing if not aggressive; a contemporary cartoon portrayed him as a hunter bagging hares labeled with the names of Midland acquisitions. He would make an unsolicited takeover offer for a bank and, if it refused, open a Midland branch to compete with it as soon as possible.

Continued Expansion in the Early 20th Century Midland's expansion continued into the early years of the 20th century. The acquisition of North & South Wales Bank in 1908 was one of its more important acquisitions, giving Midland stronger Welsh connections. In 1914 it took over Metropolitan Bank, a substantial institution in its own right with deposits of almost £12 million. In that same year, Midland expanded its presence into Northern Ireland with the purchase of a large interest in the Belfast Banking Company. And in 1918, the bank made its largest acquisition to date when it bought out the London Joint-Stock Bank, with more than £60 million worth of deposits. Midland also took an increased interest in foreign loans and underwriting during this time. After assuming the title of managing director in 1898 and delegating much of his authority to senior executives, Holden traveled to North America and became convinced that his bank ought to do more overseas business. His straightforward manner won him friends in the American banking community, and he once considered opening Midland branches in New York and Chicago.

At Holden's instigation, Midland opened a foreign exchange department in 1905 and was the first British deposit bank to do so. His London colleagues criticized the move as unconventional, but it proved so successful that all of Midland's major competitors eventually followed suit. The bank's traveler's check business and its installation of branch offices on Cunard ocean liners in 1920 both stemmed from this interest in foreign business. Sir Edward Holden (he had been made a baronet in 1909) died in 1919. He had started out as a bank clerk and worked in the banking business all of his life; it was a sign of the stature that Midland Bank had achieved during Holden's reign that his successor as chairman was a Cambridge graduate who had served as first lord of the admiralty, home secretary, and chancellor of the exchequer in the liberal government of Prime Minister Henry Asquith. The Rt. Hon. Reginald McKenna left politics in 1917 to become Holden's heir apparent, but remained an outspoken authority on economic matters all of his life and was a noted ally of John Maynard Keynes.

Under McKenna, Midland stopped its practice of expansion through acquisition, but only because treasury regulations in the 1920s made mergers virtually impossible. The purchase of North of Scotland Bank in 1924 would be Midland's last acquisition for more than 40 years. Despite these difficulties and the political and economic instability of the interwar years, Midland still prospered and expanded through its branch network. By 1939, it had more than 2,100 branch offices. By 1934, it had become the largest deposit bank in the world, with more than £457 million in assets. Reginald McKenna died in 1943. During the 1940s and most of the 1950s, Midland was comparatively dormant, at first because of the disruption and destruction caused by World War II, and after the war had ended, because of tight credit restrictions. Expansion of its branch network stopped.

Falling Behind Competitors: 1950s-1970s The government eased credit restrictions in 1958 and expansion resumed, but Midland found that it had fallen behind its major competitors--Barclays, Lloyds, National Provincial, and Westminster formed the Big Five deposit banks along with Midland--in developing its foreign operations, an area in which it had once blazed the trail. To rectify this situation, Midland combined with the Commercial Bank of Australia, Canada's Standard Bank, and the Toronto-Dominion Bank in 1963 to form Midland and International Bank. The new institution was designed to engage in both merchant and development banking activities, and it also marked the first time that a British bank participated in an international banking joint venture. In 1967 Midland scored another first when it purchased a 33 percent interest in the merchant bank Samuel Montagu. This marked the first merger in Britain between a merchant bank and a deposit bank and was taken as a sign that the Bank of England was willing to blur the traditional lines between financial companies.

Midland wanted to diversify its activities and also sought Montagu's expertise in international markets, and Montagu felt that it would gain business among Midland customers. During the late 1960s, as Midland shed its image as a banker's bank and a correspondent bank, it cofounded Bank Europ&eacute-e de Credità Moyen Terme and several other consortium banks, with Deutsche Bank, Amsterdam-Rotterdam Bank, and Société General de Banque, but later divested itself of these consortium banks. In 1974 Midland increased its stake in Samuel Montagu to 100 percent. It also acquired another merchant bank, the Drayton Corporation, and merged it with Montagu. This stronger commitment to merchant banking did not work entirely to Midland's advantage, however; Montagu's financial performance had been solid, but Drayton came with many questionable real estate investments, causing Midland's position in merchant banking to slip somewhat after the acquisition. In 1982 it sold a 40 percent stake in Montagu to Aetna Life and Casualty, only to buy it back in 1985.

International Ventures in the 1980s Despite its international ventures, Midland still lagged behind its rivals in establishing an overseas presence in the late 1970s. The problem was that Midland had done all of its foreign business through correspondent banks, consortiums, and joint ventures and had little direct representation abroad. Midland promptly tried to make up for lost time, but with mixed results. In 1979 it acquired 67 percent of Banque de la Construction et les Travaux Public, a French mortgage and real estate bank. That year it also made a bid for the American financial company Walter E. Heller, but called it off after discovering that Heller held an unusually high number of problem loans in its portfolio. In 1980 Midland purchased 60 percent of Trinkaus und Burkhardt, West Germany's largest privately owned bank, from Citicorp. And in 1982 it acquired a 69 percent interest in Handelsfinanz Bank of Geneva from Italy's Banca Commerciale Italiana. These acquisitions gave Midland a substantial expertise in foreign markets. But the centerpiece of this strategy was an unqualified disaster.

In 1981, Midland acquired a 57 percent stake in Crocker National Bank, the fourth largest bank in California and twelfth largest in the United States, for $820 million. It was the largest foreign takeover, ever, of an American bank. Midland, of course, sought to establish a large direct presence in one of the most prosperous regions in the country through the deal, and Crocker felt that the increase in capital would allow it to expand. Midland, already the third largest deposit bank in Britain, became the tenth largest banking organization in the world when the deal was consummated. But the honeymoon did not last long. Crocker's financial performance began to falter almost from the moment Midland took it over, and it collapsed in 1983 when it posted a loss of $62 million for the fourth quarter.

Plagued by bad real estate loans and a substantial share of Latin American debt, it went on to lose $324 million for its parent company in 1984, causing The Economist to exclaim in one headline, "What a big hole Crocker is making in Midland's pocket." Nevertheless, Midland stuck by its beleaguered subsidiary, even buying out the rest of Crocker's stock in 1985 after it hit its rock-bottom price of $16.25 per share, down from $90 in 1983. Before long, however, Midland decided that it had had enough. In 1986 it sold Crocker National to one of its California rivals, Wells Fargo & Company, for $1.1 billion, roughly the same amount of money that Midland had sunk into Crocker. But the Crocker debacle did not end there. Five years of nursing a major acquisition had stunted Midland's capital base while its competitors increased theirs.

So when Sir Kit McMahon, an Australian-born former deputy-governor of the Bank of England, became chairman and CEO in 1987, his first priority was to bolster Midland's capital by means of a rights issue and by selling assets. Profitable regional subsidiaries in Scotland, Ireland, and Northern Ireland were divested in 1987. In the same year, Midland Montagu was established, combining the group's treasury, global corporate, international, and investment banking businesses. Midland Montagu was the result of the merger of Samuel Montagu & Company; Greenwell Montagu Gilt-Edged, the leading British government bond primary dealer; and Midland's international corporate banking operations. Overall, the bank aimed to concentrate on its core domestic banking business, deemphasizing international operations. Optimism about Midland began to surface again in the securities markets, and its depressed stock looked like a bargain. In 1987 several parties purchased substantial interests in the bank. Hanson Trust acquired 6.5 percent, tabloid publisher Robert Maxwell acquired 2.5 percent, and Prudential Insurance Company bought two percent.

In 1988 the Kuwaiti Investment Office disclosed that it owned a 5.1 percent stake in Midland. All of this led to speculation in the financial press that Midland might itself become a takeover target. Midland reacted in late 1987 by agreeing to let the Hongkong and Shanghai Banking Corporation acquire a friendly 14.9 percent of its stock. Hongkong agreed to hold the stake for a standstill period of three years while the two banks consolidated and rationalized their international businesses, with Hongkong to concentrate on Asia and Midland on Europe. Acquisition by HSBC Midland's 1987 results illustrated that the bank was recovering from, but still seriously affected by, its disastrous international forays. Operating profits before provisions increased 18 percent over the previous year to £511 million, but because the bank was forced to take a huge provision for bad debt (primarily to guard against defaults on shaky Third World loans undertaken earlier in the decade), it posted an overall operating loss of £505 million. On the positive side, the asset sales, rights issue, and outside purchases of Midland stock had improved the bank's capital strength.

The three-year agreement between Midland and Hongkong was an important component of Midland's newfound domestic focus. For example, in 1988 Midland Bank Canada was transferred to Hongkong Bank of Canada. Although the agreement was not renewed in 1990, Hongkong retained its large stake in Midland. The two companies entered into merger talks in 1990, but the talks broke off late in the year because of what were termed "financial difficulties." In 1991 Midland was still struggling to recover when McMahon resigned in March; he was replaced as chief executive by Brian Pearse, who had been finance director at Barclays. The same week as McMahon's departure, the bank announced that its dividend would be reduced from 18p to 9p, the first time in history Midland had cut its dividend. Meanwhile, Hongkong reorganized itself in 1991, creating a new holding company, HSBC Holdings plc, and making Hongkong a subsidiary of HSBC Holdings. HSBC stock was set up on both the London and Hong Kong markets, showing the importance Hongkong placed on Europe (and London) for its future.

This emphasis was borne out the following year when the long-anticipated merger of Hongkong and Midland finally occurred. In March 1992 HSBC Holdings made a friendly takeover offer for Midland, amounting to 378p for each share of Midland stock. The next month Lloyds contemplated entering into the bidding with a hostile takeover offer of 400p per share. For Midland, a merger with HSBC would keep its domestic operation fairly intact; HSBC planned to earn back its investment from synergies that would develop between the two largely complementary operations. By contrast, merging with Lloyds would mean the end of the Midland name and huge reductions in branches and employees; Lloyds planned to cut costs dramatically to make the takeover pay off. The sharp differences between these choices quickly became moot when HSBC upped its offer in June to 480p per share, leading Lloyds to decide not to pursue Midland anymore, concluding that the price had grown too high. HSBC ended up paying £3.9 billion (US $7.2 billion) to acquire Midland.

About the same time this deal was being concluded, Midland continued its focus on banking by divesting its travel agency subsidiary, Thomas Cook Group Ltd., through a £200 million (US $363.9 million) sale to the LTU Group, a German travel operator. Over the next few years, HSBC worked to revamp Midland and bring the bank under HSBC control. Management was almost immediately shaken up, as Midland's two management boards were reduced to one, an entire layer of management was eliminated, and HSBC executives were brought in to take over key slots. In July 1992 two senior Midland executives--Gene Lockhart, head of domestic banking, and George Loudon, head of international banking--resigned, and Keith Whitson, who had headed up HSBC's Marine Midland (no relation to Midland Bank) subsidiary based in New York, was brought in as deputy chief executive reporting to Pearse. Whitson soon moved into the top spot, replacing Pearse, who took "early retirement." HSBC placed its own people in the other key positions as well. Another change was the merger of Midland's corporate and institutional banking operations.

Overall, a few years after its completion, the merger was viewed positively by most analysts. Thanks to its improved capital base, Midland's market share was improving because the bank could seek out younger, riskier customers who bring in more profits. Companywide, profits recovered and grew steadily: £844 million before tax in 1993, £905 million in 1994, and £998 million in 1995. Midland Bank, although no longer an independent firm, faced a much brighter future in the mid-1990s than it did just a few years earlier. Backed by the deep pockets and international strength of HSBC Holdings, Midland was well positioned to regain some of its past glory. Principal Subsidiaries: Forward Trust Limited; Griffin Factors Limited; HSBC Limited; Midland Bank Trust Company Limited; Midland Life Limited; Swan National Leasing Limited; Midland Bank SA (France); Trinkaus & Burkhardt KGaA (Germany; 71%); Midland Bank International Finance Corporation Limited (Jersey); Guyerzeller Bank AG (Switzerland).

Additional Details Wholly Owned Subsidiary of HSBC Holdings plc Incorporated: 1836 Total Assets: £93.63 billion (1995) Stock Exchanges: London

Question: Midland Bank became part of which larger Bank in the 1990's?
Answer: HSBC