LONDON -- For Europe's largest cross-border banking takeover, the acquisition of

France's Credit Commercial de France


HSBC Holdings


caused little excitement.

HSBC closed on Monday down 41 pence, or 5.5%, at 700 after announcing over the weekend, somewhat surprisingly, that it had agreed to a takeover with CCF. Shares traded in New York slid similarly. The stock closed in New York at 57 5/8, down 3 5/16, or 5.4%

The deal values France's sixth-largest bank at around $11 billion and was clearly an opportunistic move by HSBC after CCF rejected earlier this year an informal offer from the Dutch

ING Bank

, which is CCF's largest shareholder. As the chief executive of CCF, Charles de Criosset, said: "It was HSBC or nothing."

Although the deal is subject to regulatory approval, with the bid being recommended by the CCF board and HSBC already assured approval from around 60% of CCF's share capital, it is likely the deal will go through as planned.

CCF is an unusual French bank. It is pretty efficient and profitable. Its return on equity is 15%, and management expects that to rise to 18.5% by 2001. The price that HSBC is paying, however, is 3.3 times book value and 25 times 1999 earnings, which some believe is a little expensive for a company that has little to offer in the way of synergies.

HSBC says it expects to achieve $147 million in synergies in 2001, the first full year of ownership, but "the bulk of

this is on the revenue side because there is little cost-reduction potential," according to Bruce Freedman, an analyst at


, who is maintaining his perform rating on HSBC. DLJ has no investment banking relationship with either bank.

The limited opportunities to cut costs stem from the fact that HSBC has no presence in France -- and the political minefield of trying to cut employee numbers in a heavily unionized country.

So where are the revenue-enhancement opportunities in the takeover? One of the key areas is Internet banking. CCF is developing a presence on the Internet and already has 6,000 customers who use its online banking and brokerage facilities. CCF predicts it will have 500,000 Internet customers by the end of 2002.

Certainly, the potential of the Internet is great and may afford HSBC with a more economical route to establishing pan-European operations than any large acquisitions or mergers could. Alas, in investors' minds potential revenue enhancements are much less predictable than cost cutting measures.

Another worry for investors is that this deal will increase the bank's exposure to developed markets at the expense of increasing its presence in the more exciting, and potentially more profitable, developing markets. Although the head of HSBC, John Bond, stated that he has no other plans for acquisitions in the euro zone, it is clear that after buying

Republic New York Corp.

and now CCF, HSBC has changed its strategy from buying underperforming banks in developing regions to acquiring established institutions at premiums.

Indeed, already there have been reports saying HSBC is sniffing around Germany's


(looking a little small and vulnerable after

Deutsche Bank


Dresdner Bank's

merger) and

Bank Austria


Finally, HSBC has gone out of its way to woo CCF and in doing so has gone against its global branding effort and granted the French bank a fair degree of autonomy. As part of the deal, CCF will keep its name, as well as it CEO, although it will adopt the HSBC hexagon logo.

Although the market seemed singularly unimpressed by the acquisition, HSBC has snapped up one of the highest-quality banks in France. It has also shown that Gallic pride in its financial institutions does not necessarily proscribe against takeovers, and for that alone it is perhaps a very significant deal.