HSBC’s sweeping overhaul of its business, which was announced today, will see it focus even more intensely on its dominant Asian franchise as it cuts about 35,000 roles globally, including in the UK and US. This spells good news for jobs in several sectors at HSBC in Asia, including private banking and investment banking, which both also delivered strong 2019 results.
HSBC will “strengthen” its investment banking unit in Asia, CEO Noel Quinn said today at the results presentation. Additional headcount would seem likely to follow, although this was not specifically mentioned by Quinn. The global banking and markets division (of which IBD is a part) delivered a “strong performance across all businesses in Asia compared with 2018”, according to HSBC’s 2019 annual report.
The report also highlighted continued investment in “business growth initiatives” in private banking, which is being combined with HSBC’s retail banking and wealth management unit under the new strategy. Profit in private banking reached $400m in 2019, a 19% year-on-year increase that reflected “higher adjusted revenue in Asia”, a region where HSBC is in the midst of hiring 700 people by 2022.
HSBC plans to transition its structured product capabilities from the UK to Asia, while CEO Quinn said the bank would “continue to invest” in China, in particular the Greater Bay Area, the southern Chinese region where it has been hiring heavily for several years.
Overall revenue in Asia was up 7% to $30.5bn and profit rose 6% to $18.6bn – by contrast, annual profits fell 33% at HSBC globally. Despite civil unrest plunging the local economy in recession in Q3, HSBC reported “resilient performance” in Hong Kong, with profits up 5% to $12.1bn.
But while HSBC primarily struck an upbeat tone around Asian growth, it also warned that the coronavirus outbreak is an “emerging risk to the economy across mainland China and Hong Kong, and could further dampen investor and business confidence in the region”. HSBC could be materially impacted by higher expected credit losses and lower revenue, either as a direct impact on its Hong Kong and mainland China portfolios, or from “broader impacts on global supply chains”.
CFO Ewen Stevenson told analysts today that if the outbreak continues into the second half of 2020, the “most extreme” coronavirus “downside” for HSBC this year would be $600m in new loan losses. He stressed, however, that he didn’t expect the impact to be “anything like that”.
HSBC will continue to monitor its portfolios and manage its risk exposures in light of the coronavirus, and Stevenson said it will also provide a business update on the coronavirus within its Q1 reporting. CEO Quinn said the bank owes a “debt of gratitude” to its staff in Hong Kong and mainland China for their “resilience and amazing commitment”, adding that employee and customer “wellbeing” is a priority.
Quinn said the virus will cause a “short-term economic impact” but that long-term the attractiveness of Hong Kong and China “remains unchanged” for HSBC. Asia as a whole is the “core engine of growth” for the firm under its new strategy, he added.
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