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HSBC Continues Pivot To Wealth Management

Tom Burroughes, Group Editor, 28 May 2021

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The bank is increasing its focus on wealthier clients, perceiving them to be more profitable, highlighting the fierce competition in the retail banking space, with new business models being introduced to fight for custom. Citigroup took a similar step a few weeks ago, saying it was shedding its Asian consumer banking operations.

Hong Kong/UK-listed HSBC is shedding its US domestic mass market retail banking businesses through a number of transactions as it focuses operations on the country’s wealth management segment, it announced yesterday.

The policy means that HSBC is exiting 90 branches out of a network of 148 branches. A small number of physical locations will be retained and converted into 20 to 25 international wealth centres, the banking group said in a statement. 

“HSBC Bank USA, or ‘HBUS’ will retain a small network of physical locations in existing markets which will be repurposed.

The organisation will exit all personal, Advance and certain Premier banking customers (those with balances below $750,000) and cease to serve all retail business clients, such as firms with a turnover of $5 million or below.

The move highlights how some firms are concentrating more on HNW and ultra-HNW client segments around the world, seeing these as more profitable and less prone to being commoditised and challenged by digitally-driven financial services models. As an example of the pivot to wealth, Citigroup said in April that it intended to offload its Asian consumer banking business, for which it could fetch as much as $6 billion. Citigroup plans to exit its consumer franchises in 13 overseas markets, 10 of which are in Asia. They include mainland China - where the bank has had branches since 2007 - India, South Korea and Australia. Consequently, Citigroup will divest most of its 223 branches and 17.2 million individual accounts across Asia.

“HSBC Bank USA, or ‘HBUS’, will reposition its US Wealth and Personal Banking business to focus on the banking and wealth management needs of globally-connected affluent and high net worth clients,” the organisation said.

HBUS has entered into sale agreements, subject to regulatory approval, with Citizens Bank and Cathay Bank for certain parts of the business, it said. 

“We are pleased to announce the sale of the domestic mass market of our US retail banking They are good businesses, but we lacked the scale to compete. Our continued presence in the US is key to our international network and an important contributor to our growth plans. This next chapter of HSBC’s presence in the US will see the team focus on our competitive strengths, connecting our global wholesale and wealth management clients to other markets around the world,” Noel Quinn, group chief executive, said.

Transactions
Citizens Bank has agreed to buy the East Coast domestic mass market and retail banking businesses as well as the online bank portfolio, including 80 branches and about 800,000 customer relationships with around $9.2 billion in deposits and $2.2 billion of outstanding loans as at 31 March 2021.

Cathay Bank has agreed to purchase the West Coast domestic mass market and retail business banking businesses, including 10 branches and approximately 50,000 customer relationships with $1.0 billion in deposits and $ 0.8 billion of outstanding loans as at 31 March 2021.

The news does not come as a surprise because HSBC announced earlier this year that it was exploring strategic options with respect to its US retail franchise, including a possible sale.

The announced transactions are expected to close by the first quarter of 2022, subject to regulatory approvals. 

HSBC expects to incur $100 million in pre-tax costs because of the transactions. 

The affected business is part of the US Wealth and Personal Banking operations. US WPB had reported net operating income for 2020 of $1.0 billion.

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