HSBC’s third quarter earnings results have thrown a light on why Asia has largely avoided the thousands of job cuts that the firm is already making globally – and why the region may yet escape the impending “material cuts” that interim CEO Noel Quinn flagged up today.
It’s not just that 84% of HSBC’s overall pre-tax reported profits came from Asia for the first nine months – various parts of the bank’s business are also experiencing actual revenue growth (and hiring) in the region.
Global banking and markets (GB&M) – the division that houses investment banking, trading, and transaction banking, among other functions – is a case in point. GB&M’s Q3 revenue in Asia increased 9% year-on-year, and represented more than 50% of total revenues. In contrast, global GB&M revenues fell 15% over the same period. As we reported earlier today, GB&M employees in Europe and the US are likely to bear the brunt of Quinn’s “material cuts” and “decisive action” as HSBC suffered global returns that the CEO deemed were “not acceptable” in the third quarter.
Quinn struck a markedly different tone when referring to Asia. “Clearly, we would view Asia generally, and Hong Kong specifically, as an opportunity for further growth and higher returns,” he said on a conference call today. HSBC also has plans to expand its GB&M headcount in Singapore and Southeast Asia, following the appointment Philip Lee as Southeast Asia vice chairman for global banking last month.
The strong GB&M performance in Asia wasn’t all about investment banking, however. The transaction banking franchises remained “resilient” in Q3, and GB&M also benefited from higher lending revenue in Asia. HSBC has been hiring this year in transaction banking in Asia, where it remains a top-three player, according to data from Coalition.
HSBC’s Q3 results also highlight some Asian growth areas away from GB&M, chief among them global private banking (GPB), which saw a 22% rise in Q3 year-on-year revenues in Asia. This was driven by both “investment and lending” revenues. Regional staff expenses in GPB were up 16% to US$66m as HSBC “continued to invest in business growth initiatives”.
The bank announced last September that it’s adding about 650 new staff – including front-office relationship managers and investment counsellors – to its Asian private bank, with most of the new recruits based in Hong Kong and Singapore. It appears to have been making good on this commitment in 2019. HSBC has set up a new unit in Hong Kong to cater for ultra-wealthy clients and has made several senior Asian hires in GPB, most recently Lina Lim from JP Morgan.
HSBC has also been recruiting in Asian wealth management (which serves clients not rich enough to need private bankers and which is part of the wider retail bank). Asian staff costs in retail banking and wealth management (RBWM) were up 13% in the third quarter, partly driven by “investment in strategic initiatives” to grow the wealth management business in Asia. These cost increases aren’t surprising. In Singapore, for example, HSBC plans to take on 400 wealth management and private banking employees (such as relationship managers) between 2018 and 2023.
Image credit: V2images, Getty
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