June 27 (Bloomberg) -- HSBC Holdings Plc Chairman Stephen Green ruled out spinning off the bank's Asian operations, saying the world's third-largest bank by market value is able to serve its customers better because of its size.

There's ``no good reason'' to break up HSBC, Green said at a briefing in Hong Kong today, after Goldman Sachs Group Inc. analyst Roy Ramos this month said the bank should consider a partial spinoff of its Asian operations. Green called the idea ``nonsense.''

The London-based bank, which gets almost 40 percent of its pretax profit from Asia, is putting more emphasis on emerging markets to counter slower growth and rising consumer-loan defaults in the U.S. and U.K. HSBC's Hong Kong unit generated a bigger pretax profit than its U.S. operations last year.

HSBC is a ``large, complex, slow-growth bank'' that needs more reorganizing and further cost-cutting, Ramos said in his June 12 report.

The company's London-traded shares have fallen 2.1 percent in the past year, the fourth-worst performance among nine stocks in the FTSE 350 Banks Index. Shares of Standard Chartered Plc, which makes most of its profit in Asia, have surged 24 percent.

Green also dismissed talk that Michael Smith resigned earlier this month because of resistance to his suggestion to partly carve out the bank's Asian operations. ``The rumor was groundless,'' he said. Smith, the chief executive officer for Asia, left to join Australia & New Zealand Banking Group Ltd.

U.S. Housing

The U.S. housing market ``remains unstable'' and conflicting signals make it premature to say that the worst of the sub-prime mortgage crisis is over, Green said. Two-thirds of HSBC's $10.6 billion in loan defaults last year were in North America, where the bank bought sub-prime lender Household International Inc., now called HSBC Finance, for $15.5 billion in 2003.

HSBC's profit in the second half of 2006 fell 5.7 percent to $7.06 billion as bad loans eroded profit, the company said in March. Sub-prime lending refers to mortgages granted to people with poor credit histories.

The bank will focus on growing in Asia, eastern Europe and Russia by expanding its existing operations instead of buying out rivals, Green said. HSBC has 45 outlets in eastern Europe and two in Russia, according to its Web site.

HSBC will develop its consumer finance and direct-banking operations in eastern Europe, where banks in particular have sold at very high valuations, he said. Banks in eastern Europe are acquiring rivals to boost market share in the region, where economic growth reached a record 6.9 percent last year.

In Russia, HSBC will have a ``handful of branches by the end of this year'' after receiving a consumer-banking license last month, Green said. An oil-fueled economic boom in Russia is increasing demand for financial services.

Goldman Sachs plans to add about 25 bankers to its Moscow office to keep pace with rivals including Morgan Stanley.

To contact the reporter on this story: Chia-Peck Wong in Hong Kong at cpwong@bloomberg.net

Last Updated: June 27, 2007 07:00 EDT