GUANGZHOU, China (Reuters) - HSBC Holdings PLC (L:HSBA) (HK:0005) is renewing a push into China's Pearl River Delta region - the focus of its growth strategy - with the sponsorship of trains linking the area's two biggest cities, launched on Wednesday.
The Pearl River Delta region of southern China is a conurbation of 11 increasingly prosperous mega cities just across the border from Hong Kong, home to tech giants such as Tencent (HK:0700) and Huawei [HWT.UL].
In June, Chief Executive Stuart Gulliver identified this region of 60 million people as the base from which to grow HSBC's profit in mainland China, now at around $1 billion (713 million pounds).
That announcement, however, was shortly followed by a stock market crash in China that has soured overall market sentiment towards the country while its economy slows.
HSBC's Hong Kong listed shares hit a seven-year low on Wednesday and are down 26 percent since the start of 2016.
In a fresh sign of HSBC's focus, the bank said it would sponsor trains connecting Guangzhou - the capital of Guangdong with 13 million people - to China's high-tech hub Shenzhen.
"Today, we are increasing our presence in the Pearl Delta River to support its future," Gulliver said at a launch ceremony in Guangzhou. "China is improving its connectivity, not just physically, but also financially."
HSBC, whose presence in the southern Chinese region dates to 1909, has been increasing its footprint there since 2012.
The bank, which derives the bulk of its profit from Hong Kong, has a dominant position in the Asian financial capital and needs to seek growth elsewhere.
The adjacent Pearl River Delta region, which shares a common Cantonese heritage with Hong Kong, is growing at 9 percent - above China's growth rate - and is transforming itself from a hub for low-base manufacturing to a high-tech economy.
HSBC's growth plan envisages adding 4,000 new banking employees to the existing 1,500 over three to five years, and redeploying capital from other regions.
But as China's economic growth slows, HSBC is treading more careful in executing its strategy. Hires are likely to come towards the end of the plan and the bank is being more cautious in offering loans in the area, whose level of bad debt is higher than the Chinese average, bank executives said.
HSBC, the largest foreign bank in China, has 77 bank outlets in the area. Yet winning business from domestic rivals has proven challenging for foreign players, which hold an aggregate market share of less than 2 percent in the country.