LONDON: HSBC Holdings Plc will shift billions of dollars of investment from developed markets to Asia’s faster growing economies as it looks to become the go-to bank for the region’s wealthy.
Announcing full-year profits that beat analysts’ estimates, Europe’s largest bank said it would spend more than US$6bil over the next five years to expand its Asian operations, in particular its wealth management arm. It will scale back some of its investment bank.
Adjusted pre-tax profit slid 50% to US$2.2bil in the fourth quarter, compared with a US$1.8bil estimate, the bank said. HSBC will resume paying a dividend of 15 US cents after British regulators relaxed a ban intended to preserve capital last year after the virus outbreak.
The bank said it expected Asia’s share of group capital to rise from about 42% to more than half the total within the next years, a move that is likely to be accompanied by the relocation of several of the company’s top executives from London to Hong Kong.
“It’s logical to have more of the management team down there, ” chief financial officer Ewen Stevenson said in an interview with Bloomberg Television.
“Fifty per cent of our revenues, and the bulk of our profits, now come from Asia and certainly the thrust of our growth aspirations are in Asia.”
The changes were less dramatic than some analysts anticipated with the bank largely sticking to cost cutting plans that will reduce its workforce by about 35,000.
HSBC said it intended to resume dividend payments, though not at the same level as in the past due to its investment plans and the continuing cost of the Covid-19 pandemic.
Analysts at Jefferies said the strategy looked “a bit dull in our view” and pointed to the lack of anything “concrete” in terms of the future of its retail businesses in France and the United States.
Shares were down 2% at 8:30am in London. Shares in HSBC had risen as much as 6% in Hong Kong on the back of the announcement before paring gains.
Quinn said in a statement that the bank had a “solid financial performance in the context of the pandemic – particularly in Asia, ” which lays “firm foundations for our future growth.”
The bank outlined plans to invest about US$6bil in Asia, including US$3.5bil targeted for its wealth business, which is expected to hire more than 5,000 new wealth planners over the next three to five years.
The investment comes at the expense of HSBC’s global banking and markets division, which houses its investment banking operations.
“We are essentially reducing the amount of capital we have invested in our global banking and markets business globally and reinvesting that capital into wealth and commercial banking, ” said Quinn, speaking in a telephone interview with Bloomberg.
“Much of our global banking and markets business in the United States and Europe were low-return businesses, so you could assume that that capital is coming out of global banking and markets, principally continental Europe and the United States, in order to fund the investment in capital we are making into wealth and commercial banking, primarily in Asia, but also in the Middle East.”
The bank hopes commercial banking and markets will drive “double-digit growth in profit.” It singled out markets in South-East Asia such as Singapore, as well as China and Hong Kong. — Bloomberg
Did you find this article insightful?