Tuesday, February 23, 2021
HSBC is turning even more to Asia
Europe’s largest bank has its roots in Hong Kong and wants to concentrate much more on the region in the future. To this end, HSBC is taking billions in hand. France and the USA are turning their backs on the money house. In addition, the dividend policy will be changed.
Europe’s largest bank HSBC is looking for salvation in Asia after a profit slump. The British institute wants to expand business with wealthy customers in China, as bank chief Noel Quinn announced. “The world around us changed massively in 2020. We are adapting our strategy to the new circumstances.” Last year, the corona crisis left deep marks on the balance sheet of the financial institution, which has its roots in Hong Kong and is already generating the majority of its profits in Asia.
“We want to focus on the areas where we are strongest,” said Quinn. Asset management in China and neighboring regions is to be expanded. Investment banking jobs are being relocated there from Europe and North America. Around six billion dollars in investments will flow there over the next five years. On the other hand, the money house wants to withdraw from the USA and France.
With the new strategy, Quinn is responding to the continuing pressure on earnings from the low interest rates in Europe and the USA. In order to combat the economic consequences of the corona pandemic, the central banks had again significantly lowered key interest rates. A quick change in monetary policy is not in sight. In Asia, the corona pandemic is largely over, while the European states are preparing for a third wave and the national economies are suffering. Deutsche Bank also wants to do more business in Asia in the future and hopes for more income.
Red numbers in Europe
A look at last year’s results shows how important Asia is for HSBC today. The bank made a pre-tax profit of $ 12.8 billion there, while in Europe it made a loss of $ 4.2 billion. Overall, pre-tax earnings slumped a third to $ 8.8 billion. Revenues fell ten percent to $ 50.4 billion. The provision for bad loans increased by 6 billion to 8.8 billion dollars, but remained at the lower end of the forecast range.
Analysts had expected an even stronger decline in earnings. However, investors were unsettled because of the subdued return expectations. HSBC shares listed on the London Stock Exchange fell.
HSBC expects a margin of ten percent instead of a return of ten to twelve percent, said CFO Ewen Stevenson. In order to save costs, further job cuts in administrative areas are necessary. In 2020, the money house cut 11,000 jobs. According to earlier information, 35,000 jobs of the group-wide 230,000 positions will be lost worldwide in the coming years. Investors receive a dividend of 15 US cents per share. However, they will no longer receive a quarterly dividend as before, but from next year 40 to 55 percent of profit – significantly less than before.
To keep costs down, HSBC also wants to give up numerous offices. In the longer term, about half of today’s space is needed, said Quinn. In the future, employees will work more from home, as the model has proven itself in the Corona crisis. HSBC intends to keep the main office in London’s Canary Wharf business district.