How can HSBC re-study "Return to Asia" without relocating it to Hong Kong?

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Written by: Wu Huan Shen

2021-02-23 19:45

The last update date: 2021-02-23 19:45

HSBC Holdings (0005) announced its results today (February 23). In addition to the market’s attention to the resumption of dividends, foreign media have quoted news recently that HSBC is now accelerating its “return to Asia” strategy and intends to remove several senior executives from London. The transfer to Hong Kong will also abandon the US retail banking business, and plan to expand in Singapore, China and other places, but there is no mention of moving the headquarters out of London.

As an international bank headquartered in London but whose main profit comes from Asia, it was once caught in a dilemma under the Sino-US game. It was in urgent need to re-examine its strategic layout. Not only did it need to abandon the United States to "return to Asia", but also Moved back to Hong Kong.

This means that HSBC is about to withdraw from 150 branches in the United States. This is not the first time HSBC has reported that it will withdraw from the US market or "return to Asia."

For example, in November last year, "Reuters" reported that senior executives of HSBC are considering exiting the US retail banking business completely and hope to submit their plans to the board of directors within a few weeks.

According to the records, HSBC's then chief executive Ou Zhihua had proposed a "return to Asia" strategy as early as 2015, and then gradually shifted its business focus to Hong Kong and the Greater China market.

HSBC's then CEO, Zhihua Ou, had proposed a "return to Asia" strategy as early as 2015, and then gradually shifted its business focus to Hong Kong and the Greater China market.

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Why did HSBC return to Asia?

HSBC will make this decision, which is not difficult to understand.

After HSBC's retail banking business in the United States lost US$182 million in 2018 and US$279 million in 2019, its pre-tax loss in the first three quarters of last year reached US$518 million.

In the context of continued losses, HSBC does need to re-examine its retail banking business in the United States.

Furthermore, although this bank, which has been established in Hong Kong since 1865, is the "big brother" in the banking industry in Hong Kong, it is still difficult to compete with senior banks rooted in the United States, such as the larger JP Morgan Chase and Citigroup. HSBC’s 150 branches are simply insignificant to a big bank.

In addition, according to HSBC’s 2020 interim results, compared to losses in the European market (-3.06 billion US dollars) or small profits in the Americas (23 million US dollars), Asia still recorded a pre-tax profit of 7.369 billion US dollars, accounting for A large part of the company’s pre-tax profits.

In addition to economic considerations, international political games are also the reason why HSBC has to think about its own positioning.

In the past period when the game between China and the United States has intensified, HSBC’s "London-based and Asia-based" profit policy of "separate sources from both sides" has become two different sides.

For example, in the Meng Wanzhou case, according to Reuters, in order to avoid US criminal sanctions, HSBC renewed a series of internal investigations against Huawei at the end of 2016, and in the process of several reports to the US government in 2017 , To give the United States the "evidence" involved in the Meng Wanzhou case.

This move has been criticized by mainland media in successive articles, accusing HSBC of "selling Huawei", and it is also accused of being likely to be included in the first batch of "list of unreliable entities" under the "Regulations on the List of Unreliable Entities" published by the Ministry of Commerce.

Another example is HSBC’s freezing of the bank account of Xu Zhifeng, a former Democratic legislator who absconded to the United Kingdom, which led to CEO Qi Yaonian to accept questions from the British Parliament.

The series of political pressures have indeed made HSBC need to rethink its old profit policy. Coupled with the difficult and thankless environment in the European and American markets, returning to Asia seems to be an inevitable choice for HSBC.

During several reports to the U.S. government in 2017, HSBC gave the U.S. "evidence" involving the Meng Wanzhou case.

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Reconsider moving back to Hong Kong?

In Asia, in addition to China, Singapore and India are also markets HSBC wants to actively expand; however, if HSBC wants to return to the Asian market, the old "Chinese and Western" method is obviously no longer feasible, so it must be reconsidered to relocate. Find another headquarters, and Hong Kong is definitely the best choice.

On the one hand, you no longer need to be subject to the "recommendations" of the Bank of England’s dividend payout, which drags down the company’s credibility in the investment market. On the other hand, you can focus on the Asian markets where the company is good at, without being distracted by the unprofitable European and American markets.

In fact, the relocation of HSBC's register was discussed long before the Brexit issue in 2016, but it was finally decided to keep its headquarters registered in the UK on the grounds that "its regulatory framework and judicial system are internationally recognized". There is no mention of the reasons why Hong Kong lost the election.

Years have passed. Today, with the drastic changes in the economic and political environment, it may be time for HSBC to consider relocating. The SAR government should take the initiative to negotiate with HSBC, and strive to relocate HSBC to Hong Kong and once again become a "Hong Kong citizen." Bank of".

As a "Hong Kong Bank", HSBC can be said to have witnessed the history of Hong Kong for more than half a century and grew up with Hong Kong people. To a certain extent, HSBC is similar to Hong Kong. As a bridge between China and the West, it has a glorious moment; The vortex of the game between the two is dilemma.

HSBC needs to reconsider its positioning, recognize its own limitations, and find a market that is beneficial to the company.

If it is re-registered and returned to Hong Kong, it will truly be a Hong Kong bank based in Hong Kong and focusing on the Greater China region. Apart from regaining the trust of China, it will become a huge market under the national policy of the Greater Bay Area.

Similarly, it is time for the Hong Kong government to regain its position.

If you continue to "eat your own money" and do nothing, you will not only fail to develop the economy, but will be eliminated by surrounding cities sooner or later.

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