Dive Brief:
- HSBC is considering leaving the U.S. retail banking market, the Financial Times reported Saturday, citing two unnamed sources.
- A full exit from the U.S., however, is off the table, the sources said, noting the market has strategic importance in investment banking and wealth management.
- Britain's largest lender, which in February announced a plan to cut 35,000 jobs and $100 billion in assets over three years, is looking to shore up money-losing businesses and pour its assets into more profitable Asian markets.
Dive Insight:
HSBC's U.S. retail unit lost $518 million before taxes in the first three quarters of 2020 — a margin that has widened from $182 million in 2018 and $279 million last year, according to the Financial Times.
A pullout would cap a 40-year brick-and-mortar presence that launched in earnest in 1980, when the London lender bought a controlling interest in Buffalo, New York-based Marine Midland Bank. HSBC now has about 150 branches, mostly huddled on the East Coast, after closing 79 in the first half of this year.
However, sacrificing the unit may not represent too great a loss for Europe's biggest bank. The U.S. arm's $62 billion loan book accounts for less than 6% of HSBC’s total, according to Bloomberg.
"The jury is still out," one Financial Times source said. "We are examining the financial viability of the cost and the reward of exiting or having a middle strategy where we keep a smaller presence."
HSBC wouldn't be alone in opting for a lighter presence. Spanish lender BBVA announced this month it planned to sell off its U.S. banking arm to PNC. But it, too, is holding on to key assets — specifically, broker-dealer BBVA Securities and the bank's New York branch, which will continue to provide corporate and investment banking services to corporate clients.
The U.S. isn't the only market HSBC has weighed exiting. The bank kicked off the sale of its French retail operations in January, sending an overview of the business to potential buyers including Credit Agricole, BNP Paribas and private-equity firms Cerberus and Apollo Global Management, Bloomberg reported at the time.
Cerberus and a rival told the bank they would buy the French retail arm for a symbolic one euro if the bank were to invest €500 million into the business, Reuters reported in September.
HSBC, meanwhile, makes more than half of its revenue and almost all of its profits in Asia, and announced in August it aims to hire 2,000 to 3,000 wealth planners over the next four years in China.
HSBC's senior management, which is set to present a plan to the bank's board in the coming weeks, is likely to suggest zeroing in on investment bank clients with ties to Asia and the Middle East and de-emphasizing those with strictly U.S. interests, the Financial Times reported. The bank said this year it has cut $4 billion in risk-weighted U.S. assets through "client optimization."
Another plan would see the bank push a digital-only model focused on clients with specific ties to China and India. Although one Financial Times source called that market "crowded," other investment banks have seen success in launching a digital-only presence. Goldman Sachs's Marcus reported $92 billion in customer deposits through July, four years after launch.
HSBC declined to comment.
