Britain's largest banking group, HSBC Holdings, has agreed a $10.3 billion (€9.5 billion) takeover of US banking group Republic New York Corp and its European private banking affiliate, SRH.

The acquisition, HSBC's largest, would be its strongest move yet into the US market and a major expansion of its private banking operations.

HSBC said in February it would list in New York this year, which began speculation it would be used as a launching pad for a big acquisition in the US, where it has been relatively under-represented until now.

The agreed all-cash bid would be one of the largest foreign takeovers of a US bank since Deutsche Bank announced its $10.1 billion bid for Bankers Trust.

HSBC's $72 per share bid values the New York-based Republic New York Corp and its 49 per cent stake in Safra Republic Holdings at $7.6 billion.

The bid values the 51 per cent of SRH not owned by Republic at $2.6 billion.

SRH is a Luxembourg-based private banking group with subsidiaries in France, Switzerland, Gibraltar, Monaco and Guernsey.

HSBC said it would fund the acquisition with a $3 billion placement of ordinary HSBC shares, the planned issue by a special purpose vehicle of preference shares and existing HSBC cash.

It said the deal, which had been approved by both the SRH and Republic boards, would deliver annual cost savings of more than $300 million within two years and would generate restructuring char ges after tax of about $450 million in 1999 and 2000.

But HSBC's shares fell 39p or 1.8 per cent to £21.52 (€32.53) in the first hour of trade after the deal was announced, as analysts worried over the size and pricing of the placement to fund the issue.

"My only criticism is why have they got to issue new shares," said Mr Martin Cross, analyst at Teather & Greenwood.

"They have quite a high tierone [capital] ratio of 9.7 per cent . . . It looks like the bank's very conservative financial culture showing through," Mr Cross said. Dealers said the placing was likely to weigh on the stock until it was completed and the placement price was known.

HSBC's chairman, Mr John Bond, said HSBC wanted to maintain its balance between (OECD) countries and emerging markets.