HSBC unveiled an additional strategic shift to Asia and retreat from the west, pledging to speculate $6bn to increase in Hong Kong, China and Singapore, whereas confirming it could promote its US retail arm and shortly exit its French client financial institution.
Chief govt Noel Quinn additionally introduced he would symbolically relocate a few of his high administration group to Hong Kong, saying “we’ll transfer the guts of the enterprise to Asia, together with management”.
The adjustments got here because the financial institution on Tuesday reported a 50 per cent plunge in fourth-quarter revenue. Whereas stark, that decline was lower than projected by analysts as coronavirus-related loan-loss provisions tailed off, permitting the financial institution to restart paying a modest dividend.
HSBC additionally mentioned it could minimize an additional $1bn in annual prices and prioritise enlargement within the fee-generating wealth administration enterprise.
Quinn mentioned the financial institution was seeking to slash 40 per cent from its world head-office prices over time, after a yr by which the pandemic has upended working practices.
“We’ve got acquired to face actuality, the world has modified,” he mentioned in an interview. “Our journey and premises prices will likely be rather a lot lower than they have been pre-Covid”, including that HSBC would “undertake a extra versatile working atmosphere” and abandon a few of its costlier properties in its most important hubs.
The cuts won’t have an effect on HSBC’s headquarters in Canary Wharf in London — the place it has a lease till 2027 — or its historic founding outpost in Hong Kong, however reasonably extra peripheral properties in these cities.
Quinn and chairman Mark Tucker are accelerating a radical overhaul of the 156-year-old lender to galvanise efficiency and win again sceptical buyers, which have offered out of the inventory lately.
“In 2020, we skilled financial and social upheaval on a scale unseen in dwelling reminiscence,” mentioned Tucker. “The exterior atmosphere was being reshaped by a spread of things — together with the affect of commerce tensions between the US and China, Brexit, low rates of interest and speedy technological growth.”
The announcement strengthens a technique set this time final yr, which is able to shift $100bn of capital to Asia, minimize 35,000 jobs in Europe and the US, and enhance plans to change into a market chief in wealth administration in Asia.
Greg Guyett, co-head of world banking and markets, Nuno Matos, chief govt of wealth and private banking, and Barry O’Byrne, chief govt of economic banking, will transfer from London to Hong Kong. Relocating the trio will imply enterprise divisions that account for nearly all of HSBC’s world income will likely be run out of town.
The choice has symbolic significance contemplating HSBC’s precarious place, caught in the course of escalating geopolitical tensions between the west and China as they face off over the way forward for Hong Kong and world commerce.
The financial institution has no plans to maneuver any high managers to mainland China. Quinn mentioned: “Myself and [chief financial officer] Ewen [Stevenson] . . . will certainly keep based mostly right here in London,” and he dominated out one other evaluation of transferring the lender’s headquarters.
HSBC additionally confirmed for the primary time that it was exploring a sale of its 150-branch US retail community — retaining funding banking, company and wealth administration companies within the nation — and was near exiting its 200-branch French client financial institution.
“We do not imagine now we have a robust aggressive place within the [US] retail enterprise [and] Covid and low rates of interest have made the problem even larger,” mentioned Quinn. “On France, we’re within the closing levels on the negotiations of a possible sale.”
HSBC’s strategic announcement was total brief on element. Joseph Dickerson, an analyst at Jefferies, mentioned “the up to date 2022 technique plan appears to be like a bit uninteresting” and buyers have been “trying to find the narrative”.
“The technique replace . . . provides restricted new surprises,” mentioned Citigroup analyst Ronit Ghose. “Double-digit returns will stay difficult within the coming years till charges rise.”
Quarterly adjusted pre-tax income slid 50 per cent yr on yr to $2.2bn, $400m greater than analysts had anticipated. Impairment costs for dangerous loans climbed $1.2bn within the closing three months of 2020, growing HSBC’s cumulative reserves to $8.8bn for the yr. That helped drive annual pre-tax revenue down 45 per cent to $12.1bn.
The financial institution will restart paying a dividend of $0.15 a share after a Financial institution of England ban on shareholder payouts was partially lifted late final yr. Nonetheless, reflecting the unsure outlook, HSBC lowered its profitability goal from 10 to 12 per cent return on fairness to 10 per cent “over the medium time period”.
HSBC shares jumped by as a lot as 7 per cent in Hong Kong on Tuesday. The inventory has risen 18 per cent this yr, however stays down by greater than a fifth from its pre-pandemic ranges in early 2020.