Banking giant HSBC has launched a major revamp, with plans to sell underperforming assets and boost profits. It will cut its assets by a quarter and plough most of the capital released into fast-growing Asia, which accounted for 78% of last year's $19bn of pre-tax profits. Costs are set to fall by $5bn overall 25,000 jobs will go, including 8,000 in the UK, where it has decided to rebrand its high-street retail business after 2018.
It may revive the Midland name, or call it First Direct, the name of its current phone and internet bank. That business could then be spun off. HSBC also released a document called "Structured Review of Location of Holding Company", which spelt out 11 criteria for its decision on where to base its headquarters. It has been threatening to re-domicile in Asia, from the UK.
What the commentators said
Yet it's hardly as though the levy has been a major drain on resources compared to HSBC's self-induced problems, as Ruth Sunderland noted in the Daily Mail. It has paid $3bn since the tax was introduced, but in recent years has faced over $11bn of fines and legal bills. What's more, pushing through the latest revamp will cost $4bn. And upping sticks to Hong Kong or Singapore isn't as easy as it sounds, said James Moore in The Independent.
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HSBC makes great play of transparency and stable legal frameworks, but who knows whether China will maintain its current hands-off approach to Hong Kong. And if it chooses Singapore, "Beijing might not be too impressed" and could thwart efforts to expand in mainland China.
The review itself was underwhelming, as Nils Pratley noted in The Guardian. The prize is a return on equity (a key gauge of profitability) of 10%. Yet that's no great shakes. The worry is that, even after the "pivot to Asia", HSBC may "still be too big and too sprawling" to run efficiently. What's more, version A of this broad plan was introduced in 2011, since when Brazil and Turkey have declined and Asian competition grown more intense. "HSBC is still struggling to keep up."
Andrew is the editor of MoneyWeek magazine. He grew up in Vienna and studied at the University of St Andrews, where he gained a first-class MA in geography & international relations.
After graduating he began to contribute to the foreign page of The Week and soon afterwards joined MoneyWeek at its inception in October 2000. He helped Merryn Somerset Webb establish it as Britain’s best-selling financial magazine, contributing to every section of the publication and specialising in macroeconomics and stockmarkets, before going part-time.
His freelance projects have included a 2009 relaunch of The Pharma Letter, where he covered corporate news and political developments in the German pharmaceuticals market for two years, and a multiyear stint as deputy editor of the Barclays account at Redwood, a marketing agency.
Andrew has been editing MoneyWeek since 2018, and continues to specialise in investment and news in German-speaking countries owing to his fluent command of the language.
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