Global banking giant HSBC

 (HBC) got its clock cleaned in the U.S. mortgage crisis, having spent $15 billion in 2003 to buy Household International.

The timing of that deal was just right so that write downs were about the same as what HSBC had paid to acquire the company: HSBC paid $15 billion to buy $15 billion in losses.

But there are advantages to things going so terribly wrong. If you survive -- and the bank did rebuild its capital by raising $17.7 billion through a stock offering in April -- you have good reason to examine your strategy from top to bottom.

In the case of HSBC, that resulted in the bank's decision to return to its Asian roots. Chief executive officer Michael Geoghegan has announced that he will be moving his office to Hong Kong from London. 

That looks likely to be the key that would unlock a stock offering in China for HSBC, making the bank one of the first non-Chinese companies to list and raise money on a Chinese exchange.

At the end of 2008, Hong Kong and the rest of Asia accounted for 26% of the bank's assets. That percentage will climb as HSBC's China business grows and as HSBC takes advantage of troubles at competitors to pick up Asian assets. HSBC has emerged as the front runner to buy the assets of troubled Royal Bank of Scotland (RBS) in China (13 branches), India (28 branches), and Malaysia.

With the Chinese economy set to return to 10% economic growth in 2010 -- how sustainable that is for the long term is another story -- and with Chinese exports likely to return to growth next quarter (see this post and this post), owning a bank that holds an increasing bit of Asia's banking business seems like a good investment.

Buying HSBC isn't without risk. HSBC is trying to wind down its portfolio of U.S. mortgages and loans, but if the U.S. economy and its housing sector in particular dip back into recession, the losses will be greater than I now expect. (My buy is based on my belief in a modest 1.5% to 2% growth in the U.S. in 2010.)  

In the short term, while prospects in China are promising, it is still generating losses as HSBC invests in that business, so HSBC can't expect profits there to offset any unexpected losses in the U.S.

The biggest danger -- which I don't think will happen -- is that the recovery in revenue I'm looking for won't arrive in 2010, but will be delayed until 2011. Current expectations at S&P are for operating earnings of $4.05 in 2010, so the stock isn't expensive if that projection is accurate.

As of Tuesday, I'm adding this stock to Jubak's Picks with a target price of $67 a share by December 2010. (It traded just above $57 late Tuesday.) The stock pays a dividend of 2.7% as of December 15th.

At the time of this writing, Jim Jubak owned shares of HSBC in his personal account and planned to buy more three days after this is posted. The stock is also a member of his long-term Jubak Picks 50 portfolio.