It makes about 60% of its profits from Asia, it has Hong Kong embedded in its name, and it was run from the city for more than a century. But the Hongkong and Shanghai Banking Corporation (HSBC) has decided to keep its headquarters in London.
What does this mean for HSBC staff in Hong Kong and China? Surprisingly, perhaps, the reaction to the decision is mainly one of mild relief rather than despair, with the firm’s share price in Hong Kong closing up 4.47% on Monday.
1. HSBC still hiring heavily in China (but more slowly)
HSBC still wants to create 4,000 jobs in the Pearl River Delta – which encompasses Hong Kong and the neighbouring Chinese province of Guangdong – and the domicile decision hasn’t directly affected this. But the expansion, originally earmarked for the next three to five years, may happen at a “slightly slower” pace than expected because of falling mainland stock markets and economic growth, Stuart Gulliver, the bank’s Chief Executive Officer, told Bloomberg.
This is perhaps just as well – as we’ve frequently alluded to, skills shortages in China’s undeveloped banking sector make large-scale recruitment difficult (even UBS’s plans to hire 600 people are ambitious in a China context). Gulliver has now given HSBC some breathing space.
2. No sign of job losses in Hong Kong and staff aren’t rushing to the exit
When European banks (most recently Standard Chartered and Barclays), have made major decisions affecting Asia, their local employees – who are prone to job hopping even at the best of times – often look for a quick exit. But HSBC’s domicile decision is “very unlikely to lead to job cuts as the bank didn’t hire extra staff in expectation of a move to Hong Kong”, says a recruiter in the city. “And I haven’t seen any surge in HSBC staff calling me about jobs elsewhere,” he adds.
Gulliver also had encouraging words for Asian employees. “We are still committed to the pivot to Asia,” he told Bloomberg. “We still believe that if you take the next 10 years there will be faster gross domestic product growth in Asia than anywhere else in the world.” Moreover, HSBC’s staff shouldn’t be at all surprised that they’re not working at global HQ. After an initial bout of analyst enthusiasm for Hong Kong following the announcement of the firm’s relocation review last April, more recent reports – in particular from Aberdeen Asset Management – have been firmly in the London camp.
3. There’s now no need for any panicked compliance hiring
As we noted last year, HSBC has been recruiting in the hundreds in compliance in Hong Kong, but has faced a shortage of candidates. The firm’s local HR chiefs will be relieved, therefore, that talk of a Hong Kong move has finally been put to bed as it would have inevitably involved regulatory recruitment on an even more daunting scale. HSBC says its decision to stay in London was taken on the basis of the UK’s strong regulatory system and expertise in handling “complex international affairs”.
Suddenly becoming the global HQ could have piled too much pressure on both HSBC’s compliance team and the Hong Kong Monetary Authority. An anonymous senior banker at a major bank in Hong Kong told Finance Asia that the regulator would have been ill-equipped and undermanned to monitor HSBC’s newly globalised transactions. HKMA chief executive Norman Chan Tak-lam issued a statement on Monday which said “the HKMA appreciates that for a large international bank such as HSBC, relocation of domicile is a very major and complicated undertaking”.
4. You won’t be ‘beholden to Beijing’
HSBC employees can now rest assured that they won’t be working for a ‘Chinese bank’ in the future. While the firm publicly focused its decision on the positives of remaining in London, many commentators believe HSBC’s management were also spooked by fears that China could ultimately exert more control over it following a move to Hong Kong. “It would be very dangerous to be beholden to Beijing’s regulators who don’t understand global markets and won’t for a long time,” the senior Hong Kong banker told Finance Asia.
5. Asian bankers working on cross-border deals may benefit
Asia-based bankers who can help expansionist Chinese companies acquire assets overseas are in strong demand. By keeping its global headquarters in the UK and its Asia headquarters in Hong Kong, HSBC can take advantage of facilitating “international flows” and cross border deals such as ChemChina’s acquisition of Swiss company Syngenta, where the firm is the lead advisor, Peter Wong Tung-shun, Asia Pacific chief executive of HSBC, told the South China Morning Post.
“We are very familiar with both the Chinese companies and the European regulation which allow us to capture these cross border transaction,” he added. Wong may have a point – although based in London, HSBC ranked third in announced Asia ex-Japan M&A last year, higher than any China-based bank, according to Dealogic data.
6. Don’t worry: it wasn’t the riots
If you are among the minority still fretting about HSBC remaining in London, you can at least rest assured that Hong Kong didn’t blow its chances at the last minute because of the riots over Chinese New Year. “Our decision of not moving our headquarters back to Hong Kong has nothing to do with the Mong Kok riot. In fact, UK has (also had) riots recently,” said Wong.
Image credit: gionnixxx, iStock, Thinkstock