The cash purchase would boost HSBC's US presence by adding 82 branches of Republic National Bank of New York, Republic New York's principal subsidiary, to HSBC's US unit, which is based in Buffalo, NY but HSBC is believed to be most interested in Republic's presence internationally, where it has established a series of niche businesses, chiefly in providing asset management, investment and banking services to wealthy clients. Republic has a 49 per cent stake in Luxembourg-based Safra, its European private banking affiliate.

Safra is the holding company of banks in Switzerland, France, Luxembourg, Guernsey, Gibraltar and Monaco. HSBC said the purchase will double its private banking business through the addition of 30,000 international clients, principally located in Latin America, Europe and Asia, with total funds of $ 56.5 billion. HSBC expectsthe combination of businesses to produce cost savings of $ 300 million a year within two years. The bank added that it will take restructuring charges relating to the acquisition of $ 450 million after tax in 1999 and 2000.

In addition, an HSBC news release said the banking group would place nearly $ 3 billion in new ordinary shares, or 3.3% of its existing issued ordinary share capital, to help finance the purchase. The shares will be offered in the United Kingdom at 75 pence each and in Hong Kong for 10 Hong Kong dollars a share. HSBC said the actual number of shares to be placed will be determined after the book building closes. Republic's stock and options were actively traded Friday amid speculation about a takeover. In New York Stock Exchange composite trading on Friday, Republic jumped $ 8.4375, or 14 per cent, to $ 70.

In Hong Kong, HSBC fell 4.3 per cent to 270 Hong Kong dollars (US $ 34.83). The deal would require approval from state and federal regulators in the US. If completed, it would markthe second large acquisition of a US bank by a foreign bank to be announced in recent months and would help HSBC stay among the ranks of the world's largest banking institutions. In December, Deutsche Bank AG of Germany announced that it would purchase Bankers Trust Corp., the US's eighth-largest bank, for $ 10.1 billion.

That acquisition, which would create the world's largest bank measured in assets, is expected to receive final regulatory approval within weeks. The purchase of Republic would increase HSBC's assets to about $ 530 billion from $ 483 billion at the end of 1998. By contrast, Citigroup Inc., the largest financial-services firm in the US and the only other bank with HSBC's global presence, has assets of about $ 700 billion.

The plans follow a difficult six months for New York-based Republic, which was founded in 1966 by Lebanese-born international financier Edmond J. Safra. Safra, 66 years old, remains the bank's largest shareholder, with a stake of just under 30 per cent.

Last fall, thecompany, to the surprise of investors, was hit by more than $ 190 million in losses stemming from investments in Russian securities after Russia effectively defaulted on its debt, triggering a financial crisis. The losses drove Republic into the red in the third quarter, for which it posted a loss of $ 92.7 million. In March, the bank announced a major restructuring that was designed to shed businesses that didn't meet its performance standards and to focus on core areas such as global private banking and currency trading.

The bank said the restructuring would result in the elimination of about 560 jobs, or 7 per cent of its work force. For the first quarter, excluding a $ 68 million restructuring charge, the bank reported net income of $ 114 million, down slightly from $ 117.5 million a year earlier. HSBC for months has been rumored to be seeking a US acquisition and is planning a US stock listing in July. But the acquisition could carry big risks. Foreign banks have had a notoriously difficult timebreaking into the U.S., where commercial banking is dominated by a few giants and retail banking remains fragmented.

Indeed, HSBC's purchase of Marine Midland Bank, recently renamed HSBC Bank USA, often is cited as an example of a purchase by a foreign bank where the reality has failed to match the fanfare. Moreover, HSBC has remained on the sidelines during the recent spate of big bank mergers, which has established a handful of huge banks such as Citigroup and Bank of America Corp., and a purchase of Republic will likely do little to close that gap. HSBC Bank USA has 374 branches in New York state and two in Pennsylvania. Marine Midland became a wholly owned HSBC unit in 1987. Republic's international operations have been boosted by Mr. Safra, who has built a near-legendary status as a banker who caters to the super-rich. As well as being "honorary chairman" of Republic, he is chairman of Safra Republic Holdings, which is described in its annual report as providing "traditional Swiss discretion to thosein Europe."

HSBC is understood to have made the first approach to Republic, whose four most senior executives are expected to sign employment agreements with HSBC. The combination could prove most complementary in Asia, where HSBC is a huge player through its Hongkong & Shanghai Banking Corp. unit and its affiliate Hang Seng Bank, also of Hong Kong. It has 443 offices in Hong Kong alone, 46 in Malaysia and 30 in Singapore.

In all, it operates in 76 countries. Republic in March named two managing directors to boost its private-banking presence in Asia. Its private-banking operations, which in 1998 accounted for nearly half the bank's net income, have a total of $56 billion in assets under management from clients in more than 80 countries.