HONG KONG – HSBC Holdings, Europe’s largest lender, announced on Thursday that it would exit the retail banking market in the United States and focus more on its wealth management business in Asia.
According to a statement, the bank will sell 90 out of its 148 retail banking branches in the US but retain a small network of physical locations in existing markets, which will be repurposed into 20-25 international wealth centers. It said its remaining branches, between 35 and 40, would be wound down.
HSBC said it would exit all Personal, Advance and certain Premier banking customers, such as those with balances below US$75,000. It said it would also exit all retail business banking customers, including small businesses with an annual turnover of US$5 million and under.
HSBC Bank USA, N.A., a subsidiary of HSBC Holdings, will reposition its wealth and personal banking business in the US to focus on the banking and wealth management needs of globally connected affluent and high net worth clients.
HSBC’s 80 branches, covering about 800,000 customers, in the East Coast will be sold to Citizens Bank for US$9.2 billion in deposits and US$2.2 billion of outstanding loans. HSBC’s 10 branches, covering about 50,000 customers, in the West Coast will be sold to Cathay Bank for US$1 billion in deposits and US$800 million of outstanding loans.
“A strong, internationally connected US business is an important part of HSBC’s value proposition, and we are excited to be focusing the US business in areas of competitive strength,” said Michael Roberts, president and chief executive of HSBC North America Holdings.
HSBC’s strategy to exit the US retail banking market and focus more on the Asian wealth management market was unveiled by the bank’s chief executive Noel Quinn in February.
Quinn said then that HSBC, which generated 53% of its revenue in Asia last year, would shift capital from underperforming businesses in Europe and the United States to Asia and invest up to US$6 billion in the region within five years.
He said the lender would invest US$3.5 billion and hire more than 5,000 people in its wealth management business over the next five years. He said the new staff would include 3,000 wealth managers in mainland China and 2,000 relationship managers, investment counselors and other customer-facing roles in Asia.
As Sino-US political tensions increased from late 2020, HSBC was once in trouble as China threatened to block the bank’s access to the mainland economy while the US said it would impose sanctions on HSBC, which supported implementation of the National Security Law in Hong Kong.
In the foreign affairs committee at the UK House of Commons on January 26, Quinn was accused by lawmakers of “double-standards, hypocrisy and appeasement” after HSBC closed the accounts of a Hong Kong democratic activist Ted Hui at the police request. Quinn said he was legally obliged to close Hui’s account.
He added that HSBC had no plans to separate its Greater China operations from the rest of the world.
Victor Ng Ming-tak, a former banker and an adjunct associate professor of economics and finance at the Hang Seng University of Hong Kong, said, “If I were the decision-maker of HSBC, I will definitely separate its businesses in Hong Kong and the United Kingdom in the coming two years.
“Hong Kong’s office would take care of local and mainland businesses while London’s office would handle the international businesses.”
Ng said it would not be surprising if some Chinese state-owned banks or insurers would eventually acquire the controlling stake of HSBC’s Greater China businesses. He said such a move would give HSBC more flexibility in doing businesses with the mainland while avoiding possible US sanctions.
On Thursday, HSBC’s shares rose 0.8% to HK$49.5 (US$6.38), the highest in 12 months, during trading hours but closed 0.31% down at HK$48.95. The benchmark Hang Seng Index fell 0.18% to 29,113 points.
Wealth Management Connect
Media reported in February that HSBC was considering relocating its co-heads of investment banking, Greg Guyett and Georges Elhedery, from London to Hong Kong or Singapore in a bid to boost the lender’s development in the Asia region.
On February 1, the lender announced the opening of a new office in Guangdong to steer a push into the Greater Bay Area, which covers more than 72 million people. The office will focus on loan business for small and medium-sized enterprises and support the bank’s wealth management business.
Daniel Chan, the newly-appointed head of Greater Bay Area at HSBC, said the bank had been well-prepared for the coming launch of the Wealth Management Connect program in the area.
On May 6, the People’s Bank of China, the China Banking and Insurance Regulatory Commission and the China Securities Regulatory Commission announced new draft rules for the cross-border Wealth Management Connect scheme.
The new rules will allow Hong Kong investors to buy directly financial products of the Greater Bay Area while people in the area can buy Hong Kong’s investment products.
On May 12, BlackRock, a US fund giant, said it had received a business license for a majority-owned wealth management venture with a unit of the country’s second-largest bank China Construction Bank and Singapore state investor Temasek Holdings.
On Tuesday, Industrial and Commercial Bank of China (ICBC), the largest lender in the country, said its unit had received approval to set up a joint venture with Goldman Sachs Asset Management.
Goldman Sachs will own a 51% stake in the joint venture while ICBC will hold the rest. The joint venture aims to create a world-class asset management business in mainland China, according to Goldman Sachs.
In April 2020, China started opening its massive financial sector as part of an interim US-China trade deal signed early last year.