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HSBC Holdings PLC, one of the world’s largest banks, has said it will inject about $ 6 billion in additional investment into Asia over the next five years as it doubles its core business.
The London-based bank, which makes most of its profits in Hong Kong and mainland China, said on Tuesday that profits fell 35% to $ 3.9 billion last year as the coronavirus pandemic shook the world economy. HSBC made $ 8.82 billion in bad debt provisions last year compared to less than $ 3 billion in 2019.
Managing Director Noel Quinn is leading the reorganization of the bank. Geopolitical tensions between China and Western countries have strained its ambition to make the bank a financial bridge between the most populous nation and the rest of the world. HSBC last year backed China’s imposition of a national security law on Hong Kong, which the US and UK governments opposed.
“We plan to focus and invest in the areas where we are strongest,” Quinn said. In an investor presentation, the bank said it would invest an additional $ 6 billion in its international wholesale and wealth management business to drive growth in Asia. HBSC will also spend more to digitize faster and said it plans to build on its strengths in sustainable finance.
The bank reported a tangible return on equity of 3.1%, down from 8.4% a year earlier, and abandoned its previous target of achieving a return of 10% to 12% on that basis by 2022 Instead, she will aim for a return of 10% or more over the medium term.
At the same time, HSBC has said it may offload some retail operations. HSBC said it is “exploring organic and inorganic options” for its US retail business and is negotiating a sale in France, which is likely to generate a loss if closed.
HSBC, which has been considering selling its French retail bank since at least 2019, is in talks with private equity firms over a divestiture, sources familiar with the situation said. Its expansion in France was built on the purchase in 2000 of Crédit Commercial de France for 10.6 billion dollars.
Founded in Hong Kong and Shanghai in 1865, HSBC grew around the world in the 1990s and early 2000s through costly buyouts, many of which had to shed. The bank took a big step forward in the United States in 2003 with the $ 16 billion takeover of subprime consumer lender Household International Inc., but the acquisition cornered the bank with billions of dollars in loans. mortgage and lawsuits following the 2008 global financial crisis. HSBC sold its US credit card business to Capital One Financial Corp. in 2012.
The US expansion caused more problems for HSBC when the Justice Department accused it of laundering the proceeds of drug trafficking in Mexico and removing data from transactions involving sanctioned countries like Iran to avoid be detected. The bank paid a then record $ 1.9 billion in 2012 to settle the allegations. HSBC has admitted wrongdoing but has avoided a guilty plea or prosecution against its executives.
In the United Kingdom, meanwhile, HSBC faces the uncertainty caused by the country’s departure from the European Union.
HSBC’s London-listed shares lost more than a third of their value in 2020, but were up 14% from the year to Monday. On Tuesday in Hong Kong, its shares jumped more than 4% in the early afternoon.
HSBC said it would pay a dividend of 15 cents per share, following an earlier indication it would make a prudent payment if circumstances allowed. He had suspended dividend payments to comply with UK regulatory requirements, angering some Hong Kong shareholders. The Bank of England’s Prudential Regulatory Authority lifted the ban on UK banks paying dividends in December.
Write to Simon Clark at [email protected] and to Quentin Webb at [email protected]
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