HSBC walking on a political tightrope

HONG KONG: The two bronze lion statues standing guard over HSBC Holdings Plc’s main offices in Hong Kong still bear the marks of an attack by protesters, who last week daubed them with red and black paint, setting at least one ablaze. Graffiti declared that HSBC had been dyed the red of China.

HSBC has vowed to restore the iconic lions to their former glory. But the Asia-focused lender may not find it so easy to disentangle itself from deepening tensions in its biggest market at a time when its new leadership must also repair a relationship with Beijing that’s been weakened by the Huawei Technologies Co probe.

The bank became the target of the public’s ire in Hong Kong after the police arrested four people linked to a group that helps pro-democracy protesters pay legal fees. HSBC had closed an account used by the group in November.

Bank executives are finding it increasingly hard to keep focused on business and steer clear of politics, said a senior executive in Asia, who asked not to be named discussing internal matters. Political tension on the streets is also causing rifts among HSBC staff. Younger local employees in the Hong Kong office tend to be supportive of the pro-democracy movement, while those with business and personal ties to the mainland are more neutral or pro-Beijing, staff interviewed by Bloomberg said, asking not to be named speaking on a sensitive issue.

With two-thirds of its profit at stake, the London-based firm has previously been able to stay away from controversy as political tensions roiled Hong Kong and dragged in peers, including JPMorgan Chase & Co and Citigroup Inc. Chinese retailers and branches of lenders like Bank of China Ltd have been targeted, while Cathay Pacific Airways Ltd and the National Basketball Association came under pressure from Beijing after employees supported the demonstrations.

HSBC has said its decision to close the protest-linked account was unrelated to the police action. It has condemned acts of vandalism against its property as “unjustified” and promised to restore the defaced lions, which it said “form parts of the bank’s and Hong Kong’s history.”

The decision was made after finding unusual transactions, people familiar with the matter said, adding that the bank risked being punished by regulators for any negligence. They asked not to be identified because the matter is private.

“HSBC is now joining Cathay Pacific in discovering that politics and business can’t always be easily reconciled, ” said Brock Silvers, managing director at Adamas Asset Management in Hong Kong. The pro-democracy protests are “doubly negative” in that they “detract from the local market while simultaneously complicating the Chinese market, ” he said.

A spokeswoman for HSBC didn’t comment beyond the statements released by the bank when contacted by Bloomberg.

Navigating the politics of the protests is one of several challenges facing interim chief executive officer Noel Quinn, who is also dealing with the fallout from HSBC’s assistance with a US probe into Huawei and the wider impact of the US-China trade war.

HSBC was singled out for contributing to the arrest of Huawei’s chief financial officer Meng Wanzhou on charges of violating US sanctions on Iran and Syria. The bank has made the case that it had no choice but to help the US Department of Justice probe. The formal hearings for Meng’s extradition to the US begin Jan 20 in Vancouver. The bank is working to improve relations with China, launching a public-relations offensive aimed at leaders in Beijing after missing out on several business licences.

Hong Kong and China together contributed two-thirds of HSBC’s adjusted pre-tax profit in the first three quarters last year. The group has US$1.1 trillion of assets across Asia, according to its interim report last year, with a majority concentrated in Hong Kong. — Bloomberg

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