The second part of this four-part series on the HSBC Group looks at the bank’s presence and development in Europe. Although the group has had a presence in Europe since the opening of the London office of the Hongkong and Shanghai Banking Corporation in July 1865, it is only in recent years – through the acquisition of banks and other companies that have been active since the late 18th century, that HSBC has become one of the largest banks in Europe. This was accomplished mainly through the acquisition of Midland Bank in 1992 and of Credit Commercial de France in 2000.

Midland Bank opened for business in Birmingham in August 1836. Its first manager, Charles Geach, had left a secure job at the Bank of England to take up the challenge of commercial banking.

In the 1830s and 1840s, Birmingham was at the heart of the industrial revolution and the new bank quickly occupied an important niche in the thriving but highly competitive economy, particularly in the discounting of bills of exchange for its customers. Links with commercial concerns were especially strong and customers included railways, iron founders, engineering concerns, utilities and municipal corporations.

In its first 50 years, the bank grew steadily by opening new branches and acquiring other banks. Most importantly, it moved into the national market in England in 1891, following the purchase of the Central Bank of London. This move was further strengthened by the acquisition of the City Bank in 1898, which gave Midland a head office in London. By 1918, with deposits of £335 million it was the largest bank in the world.

During this period of the bank’s history, under the direction of Edward Holden, Midland also began to develop its international business. It was the first British bank to set up a foreign exchange department and by 1919 was acting as London bank to some 650 correspondent banks throughout the world. From 1907, these correspondents included The Hongkong and Shanghai Banking Corporation.

The next period of substantial development for the bank came following the ending of credit restriction in Britain in 1958. The bank launched personal loans that same year, personal cheque accounts in 1958 and cheque cards in 1966. The bank also diversified its business and moved in to instalment finance, leasing and factoring services. Its purchase of a share in Montagu Trust in 1967 was the first association between a British clearing bank and a London merchant bank. In 1972 Midland was the leading member in the consortium which acquired Thomas Cook. The bank went on to become sole owner of Thomas Cook in 1977, before selling its interest in 1992.

In the mid-1970s the bank began to expand its overseas operations including the United States of America. The bank’s greater success came in Germany through Trinkhaus & Burkhardt, a private bank which had been in operation since 1841. Midland Bank acquired a controlling interest in Trinkhaus & Burkhardt in 1980 and today HSBC Trinkhaus & Burkhardt occupies a leading position in both commercial and investment banking.

In 1987, The Hongkong and Shanghai Banking Corporation acquired a 14.9 per cent equity interest in Midland Bank, and a strong working relationship began to develop. In 1989, HSBC and Midland together launched First Direct, a revolutionary concept in telephone banking with person-to-person service available 24 hours a day, 365 days a year. First Direct now also offers internet banking and with more than one million customers is the most recommended bank in the United Kingdom.

In 1992, HSBC Holdings plc acquired full ownership of Midland Bank in one of the largest acquisitions in banking history. It gave HSBC the major foothold in Europe that it needed to complement its existing business in Asia and the Americas. Midland was renamed HSBC Bank in 1999 as part of the adoption of the HSBC brand throughout the Group.

In April 2000, HSBC Holdings announced its intention to acquire Credit Commercial de France (CCF), a bank with 650 branches and E69 billion in assets.

The deal was completed in July and HSBC Holdings was listed on the Paris Stock Exchange for the first time. CCF had been created in January 1917 with the merger of Banque Suisse et Francaise, Maison Aynard et Fils and Caisse de Credit de Nice. The unified bank established its headquarters on the Champs-Elysées in 1922, where it remains to this day. Through the acquisition of CCF, HSBC established a strong position ion one of Europe’s leading markets and build a strong platform in the euro zone. The bank has also continued to expand through the purchase of Banque Pelletier in 2000 and Banque Hervet in 2001.

HSBC’s interests in Europe date back to the 1860s and the Hongkong and Shanghai Banking Corporation was the first foreign bank to open branches in Lyons (1881) and Hamburg (1889). Other interests included the acquisition of the London based merchant bank, Anthony Gibbs.

Other investments include the acquisition of a majority shareholding in Mid-Med Bank plc, the largest commercial bank in Malta in June 1999 and the acquisition of Demirbank TAS, the fifth largest private bank in Turkey in 2001.

This bank has since merged with HSBC Bank AS, which has been operating in Turkey since 1980. These developments have all contributed to HSBC’s strategy of building a strong, diversified representation throughout Europe.

Part 3 will be published next Tuesday. Part 1 was published on 7 March