Friday, 07 May 2021

HSBC Holdings chooses Asia to accelerate business growth after plans to sell its US retail business

By Sana Louahidi

HSBC Holdings is looking to focus capital from its underperforming businesses in Europe and the United States and invest $6 billion in Asia over a period of five years

  • HSBC Group chooses Asia to accelerate the growth of its wealth and commercial banking business 
  • The banking group decided to sell its US retail division after low revenues over the last three years
  • HSBC Group is expected to invest around $6 billion and hire more than 3,000 wealth managers for its growth strategy in Asia

HSBC Holdings has decided to focus its business in Asia after confirming plans to sell its retail banking division in the United States. The decision was made based on the fact that Asia has contributed 71% of the global growth in 2019 and accounts are about 42% of the banking group’s total private banking assets. The United Kingdom-based multinational investment bank is expecting faster growth in Asia. “By 2030, two-thirds of the world's middle class will be in Asia, up from just over 50% today. Trade is expected to grow 25% faster than the rest of the world over the next five years,” said Peter Wong, deputy chairman and chief executive of Hong Kong-based Hong Kong and Shanghai Banking Corporation (HSBC).

HSBC Group is determined to accelerate growth as it targets Hong Kong, China, Southeast Asia, and India as key drivers of the bank’s growth in Asia. Additionally, the bank will be increasing its offerings for its clients. The banking group will be investing around $6 billion in the region to grow its wealth management and commercial banking business over the next five years. It also intends to hire more than 3,000 wealth managers in China. As part of its growth strategy, it will also aim for Singapore which is central to its ambitious growth plans in the region. "We will be increasing our investment in both people and technology as we continue to strengthen our wholesale banking services particularly for multinational corporations headquartered in the country, and to grasp the growing wealth management opportunities in Southeast Asia and beyond."

The bank faced different challenges in the US over the last three years driven by low revenues and a lack of strong competitive position in addition to the low interest rates. HSBC Group had previously reduced its branch network by about a third in an attempt to boost profitability. It has been offering services for 40 years and had a significant presence in more than 150 branches across the US including New York, Los Angeles, Miami, San Francisco, and Washington.

According to S&P Global Market Intelligence, HSBC Group announced a restructuring programme by removing 35,000 jobs and cutting around $4.5 billion in gross costs. It is reported that the division made a pre-tax loss of $518 million in the first three quarters of 2020.

"It's coming from the west principally out of global banking and markets in the US and continental Europe which are low-return markets for us relative to the return opportunity in Asia. So we're in the process of running down part of our book in the US and Europe and reinvesting those saved risk-weighted assets into Asia," said Noel Quinn, chief executive of HSBC Holdings.



Keywords: Growth, Assets, Investments, Bank Profitability, Retail Banking
Institution: HSBC
Guest: Noel Quinn
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