Bloomberg
HSBC signals $ 6 billion investment in Asia after loss of profits
(Bloomberg) – HSBC Holdings Plc will transfer billions of dollars of investment from developed markets to Asia’s fastest growing economies as it appears to become the preferred bank for the region’s wealthy. Announcing year-round profits that exceed analysts’ estimates, The largest bank said it would spend more than $ 6 billion over the next five years to expand its Asian operations, in particular its wealth management arm. It will reduce part of your investment bank. Pre-tax profit fell 50% to $ 2.2 billion in the fourth quarter, compared with an estimate of $ 1.8 billion, the bank said. HSBC will resume paying dividends of $ 0.15 after British regulators relaxed the ban aimed at preserving capital last year after the virus outbreak. The bank said it expected Asia’s stake in the group’s capital to rise from around 42% to more than half of the total over the next few years, a change that is likely to be accompanied by the transfer of several of the company’s top executives from London to Hong Kong. “It’s logical to have more of the management team there,” said CFO Ewen Stevenson in an interview with Bloomberg Television. “Fifty percent of our revenues and the bulk of our profits now come from Asia and the impetus for our growth aspirations is certainly in Asia.” The changes were less dramatic than some analysts predicted, with the bank largely adhering to cost-cutting plans that will reduce its workforce by about 35,000. HSBC said it intended to resume paying dividends, although not at the same level as in the past due to its investment plans and the ongoing cost of the Covid-19 pandemic. Analysts at Jefferies said the strategy seemed “a little boring, in our opinion” and pointed to the lack of something “concrete” in terms of the future of its retail businesses in France and the USA. Shares were down 2% at 8:30 am in London. HSBC’s shares rose up to 6% in Hong Kong because of the announcement before reducing earnings. Solid PerformanceQuinn said in a statement that the bank had “solid financial performance in the context of the pandemic – especially in Asia”, which lays “solid foundations for our future growth”. The bank outlined plans on Tuesday to invest about $ 6 billion in Asia, including $ 3.5 billion targeted at its wealth business, which is expected to hire more than 5,000 new wealth planners over the next three years 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 invest in our banking and global market businesses and reinvesting that capital in wealth and commercial banking,” said Quinn, speaking in a telephone interview with Bloomberg. ” Much of our banking business and global markets in the US and Europe were low-return businesses, so you could assume that this capital is coming out of banks and global markets, mainly Continental Europe and the US, in order to finance investment in capital that we are making in a commercial and wealth bank, mainly in Asia, but also in the Middle East. ”The bank expects the commercial bank and the markets to generate“ double-digit growth in profit. ”He highlighted markets in Southeast Asia, such as Singapore, as well as China and Hong Kong. China’s crackdown in Hong Kong has forced every HSBC is increasingly accepting criticism from the United States and the United Kingdom as a cost of doing business in the region, and Quinn was asked to testify to British lawmakers this month about the creditor’s decision to close the accounts of a democratic exile from Hong Kong. Credit losses expected last year reached $ 8.8 billion, as expected at the lower limit of a previously announced range of $ 8 billion to $ 13 billion. He now expects them to be substantially smaller this year. aims to reduce its cost base to $ 31 billion or less by 2022, as well as a $ 100 billion reduction in assets weighted by gross risk. It does not expect to achieve a return on the tangible equity target average between 10% and 12% in 2022, but now it will target a return of 10% or more in the medium term. What Bloomberg Intelligence says: HSBC’s updated guidance with a more ambitious $ 5-5.5 billion cost savings goal combined with robust 4Q results at all levels are signs that the lender has changed the corner, paving the way for what could be a series of significant updates from analysts, even after their shares’ 50% bullish compared to the lows of 2020. Jonathan Tyce, BI financial analyst The bank released little news about its plans for Europe and the USHSBC said it is in talks to sell its French retail bank and is likely to post a loss on any divestment. He is exploring “strategic options” for his retail franchise in the United States and wants to focus on high net worth customers. HSBC has one of the largest US deals among any non-American bank, partly as a result of its ill-fated acquisition of Household International in 2003, the subprime lender that ended up costing the company billions of dollars in write-offs. (Updates with details of wealth strategy comments and telephone interview with the CEO) For more articles like this, visit us at bloomberg.comSubscribe now to stay up to date with the most trusted business news source. © 2021 Bloomberg LP