LONDON – HSBC’s European boss is betting on rising regional wealth and overseas expansion from Asian corporate clients to boost his unit’s contribution to group profit after a multi-year reboot turned the business from laggard to profit engine.
The turnaround in Europe, some details of which are reported here for the first time, helped HSBC overcome investor skepticism about its “network strategy” after a 2022 campaign by China’s top shareholder Ping An Insurance Group raised questions about whether HSBC’s fast. growing Asian business has been held back by its large presence in slower growing Western markets.
At the heart of the strategy is the notion that large corporate clients in Asia, many of whom already borrow from HSBC, will use a wider range of its services in Europe as they expand into the region, as well as tap it for local advice. deals and fundraising.
As well as benefiting from Europe-linked income from other HSBC centres, the bank wants to increase income from high-net-worth families, Colin Bell, head of HSBC Europe, told Reuters in his first interview since taking over the role in February. 2021.
“With international wholesale banking at the core, we are much more targeted from a strategic point of view,” Bell said, pointing to an increase in tangible equity to 6.7% in 2023 from under 1% in 2019 at HSBC Europe, which contributes just under a tenth of the total profit of HSBC.
“We’re starting to see the results of all that work in the numbers.”
Ping An called on the bank to save the more profitable Asian business, but other investors rejected the demand.
Alastair Ryan, an analyst at Bank of America, said investors have stopped questioning the bank’s online strategy, for now.
“People take it as obviously true that companies are better off having someone who can do their business finance, do their foreign currency payments, cash management, all their cross-border transactions.”
INCREASED PROFIT
Bell, a former British army officer who joined HSBC in July 2016, has been given a mandate to turn around the long-struggling European business.
Between 2019 and 2023, HSBC Europe will grow annual profit before tax to $2.6 billion from $1 billion, Bell said. Much of that came from declining numbers, to just 10,600 from about 17,000 with the offloading of businesses such as its French retail banking unit.
It also increased revenue originating in Europe but booked elsewhere in the bank’s vast global network by 40% to $3 billion in 2023 compared to 2022, Bell said.
Bank of America’s Ryan said rising interest rates also pushed up income from the bank’s vast $1.7 trillion global depository, which powers its international strategy.
It may be more difficult for the Europe unit to continue growing at the same pace. A campaign to attract more European businesses under the internal slogan “Europe means business”, reported by Reuters in June 2019, was largely seen as a failure as cross-border cooperation with other regions was slow to materialise, sources at HSBC said.
Headwinds became stronger. Competition for European business between banks such as BNP Paribas, Deutsche Bank and Santander is heating up. The war in Ukraine and tensions between China and the West may also hamper corporate activity.
FRESH FOCUS
Bell, however, is confident there is more business to be done. Bullish clients with idle capital in Europe can look to grow in places like Southeast Asia as supply chains reconfigure, he said.
“We are well placed to support (clients) as they look to navigate uncertain conditions in Europe with expansion elsewhere,” he said.
Companies from India, China and other parts of Southeast Asia are also looking west for new opportunities, Bell added.
The bank will look to increase assets under management at its Swiss wealth unit by 50% or about 40 billion Swiss francs ($44.3 billion) over five years, Bell said, prioritizing high-net-worth clients.
To achieve the goal, former UBS executive Gabriel Castello, appointed to manage that business in June 2022, is expected to lean on the bank’s corporate banking relationships.
Further growth is eyed at HSBC’s Channel Islands and Isle of Man business, where assets under management are expected to increase by around 70% in five years and targeted recruitment is underway.
“We’ve been through a complex, intense transformation in Europe over the last three years,” Bell said.
“So now it’s time to meet customers and have the right conversations about the capabilities that we have.” ($1 = 0.9031 Swiss francs)