Exclusive: Asia-focused HSBC puts 12 countries on its exit watch list

  • Browsing presence in smaller markets to chase larger Asian growth
  • Looking to add 2,000 Chinese wealth managers in the next two years

LONDON (Reuters) – Chief Financial Officer George Al-Hudayry told Reuters in his report that HSBC Bank (HSBA.L) is reviewing the possibility of exiting up to 1 in 5 countries in which the bank operates to increase its focus on Asian expansion. First interview since taking on the role.

The revisions, which could see the British bank decide to sell or streamline business in 12 countries, follow pressure from Chinese shareholder Ping An Insurance (601318.SS), which wants HSBC to prioritize growth in its Asian money-managed business that generates 78% of its revenue. Group profit.

“Some of these assessments will make slower progress than others, and none of them will be material enough on its own to change the profile of the business overall, but as we progress and implement these assessments, we expect them to contribute to this shift to Asia,” he said, refusing to disclose. The markets under review or the time frame of operations.

HSBC’s ongoing transformation in Asia has already led to planned sales of all or parts of its business in France, Greece, Russia and Canada, announced in the past two years.

While the markets under review may be relatively small, the move is significant in demonstrating the pressure HSBC is facing to scale back its once world-spanning domestic banking business in order to boost returns and appease investors.

HSBC does not break down the country-by-country results in its overall results, which makes identifying underperforming markets difficult.

But its business in Europe and Latin America in particular may be under scrutiny, as the former region posted a net loss in 2022 thanks to restructuring and costs booked for its regional headquarters.

Latin America contributed just under 5% of the group’s profits.

Al-Hudayry said that one of the countries not currently subject to review is Mexico, despite the debate among analysts and investors about the future presence of the bank in the country.

“Mexico is doing very well for us,” said the veteran banker, referring to the US-Mexico-Canada trade agreement and to the China Plus One strategy, which has supported Mexico’s economic growth.

“About 70% of customer acquisition in retail is through employees of HSBC banks’ multinational affiliates in Mexico, so there are strong synergies with the wholesale business and the package as a whole makes sense for us,” he added.

Bigger shows present broader challenges

Ping An was the only major investor backing HSBC’s proposals to force the bank to publish regular assessments of the merits of splitting its franchise along Asian and Western lines at HSBC’s annual meeting of shareholders on May 5.

A Ping An spokesperson said the company had no further comment.

Ping An’s failure to secure more support for the split has given HSBC chairman Mark Tucker, chief executive Noel Quinn and new chief executive Elhedery some breathing room to deliver greater profit growth on their terms.

“It is abundantly clear what the majority of our shareholders expect except what is expected of us, and therefore all our focus now is on providing services to the business and to our customers,” Al-Hudayry said.

Analysts and investors said the biggest challenges include executing sales of critical assets, managing a price war with competitors as interest rates peak, and dealing with rising political tensions between East and West.

The bank said on April 14 that a nominal 1 euro ($1.10) deal to offload its French retail business could falter after an interest rate hike raised the amount of capital backed by Cerberus, MyMay, that it would need to secure regulatory approval. regulatory. HSBC has said it expects to incur a loss of about $2.3 billion on the disposal if it continues.

Al-Hudayry said negotiations were ongoing but that HSBC would back out of the deal to protect shareholder value if necessary.

HSBC’s larger $10 billion sale of its Canadian unit has also been delayed until next year as it struggles to ensure a smooth transition of systems to the buyer, Royal Bank of Canada.

Failure to complete any of these deals could have wider consequences for HSBC.

“In the short term, the risk that France and Canada’s actions are incomplete … could put a wrench in the business of its Asian hub and unleash a new wave of activity,” said Susannah Streeter, head of money and markets. In Hargreaves Lansdown.

Beyond closing deals, Al-Hudayry said the medium-term challenge is to maintain momentum in revenue growth, with the stimulus for higher central bank interest rates around the world already waning.

The bank is trying to raise income through fee-based products and services, especially in China and Hong Kong as economies are starting to return to normal after the lifting of COVID-19-related restrictions.

Al Hudairi said HSBC is on track to hire about 2,000 private wealth managers in the Chinese insurance sector over the next two years, in addition to the 1,000 hired last year.

($1 = 0.9084 euros)

Editing by Sinead Cruz and Elaine Hardcastle

Our Standards: The Thomson Reuters Trust Principles.

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