Paring Global Ambitions, HSBC May Offload U.S. Consumer Bank

After a decade of futile corporate makeovers, HSBC Holdings Plc is on the verge of giving up on its ambition of being a full-service bank in the world’s biggest economy.

HSBC, Europe’s largest bank by market value, is looking at offloading its U.S. consumer franchise as Chairman Mark Tucker accelerates a move to sharpen the lender’s focus on its core Asian business.

The U.S. retreat would follow a sweeping restructuring earlier this year that called for 35,000 cuts -- at least the fourth strategic reboot since the financial crisis spawned in 2008. A complete exit from the U.S. is unlikely, according to a person familiar with the matter. The recommendations are expected to be presented to the board as soon as this week.

“HSBC’s U.S. franchise remains challenged by inefficiencies that we struggle to see management adequately resolving,” according to Bloomberg Intelligence analysts Jonathan Tyce and Georgi Gunchev, who see the sale of the consumer and wealth businesses there as a “preferable” solution.

Strategic Review

The review is also likely to suggest reducing investment banking activities to concentrate on international clients with a focus on Asia and the Middle East, according to the Financial Times, which earlier reported the news.

A spokesman for HSBC declined to comment. The lender’s shares were down 2% as of 2:17 p.m. in London Monday.

Obvious targets for improvement include the U.S., where HSBC is weighed down by a costly coast-to-coast branch network, and Europe, which accounted for almost half of its assets in 2019 but generated operating losses. The London-based bank, which is seeking to expand in China, earns almost all of its profit in Asia.

It’s been a miserable stretch for the company born as the Hongkong and Shanghai Banking Corp. in 1865. The last decade began with the global financial crisis and ended with the ouster of John Flint, Tucker’s initial pick as CEO, after just 18 months. In between, investors’ frustrations mounted over the languishing stock price, a pair of unsuccessful strategic reboots, and its failure to exploit a leading position in Greater China.

As tensions between the U.S. and China mounted during the Trump administration, HSBC’s focus on its core money makers became even more urgent.

The $11.6 billion sale in November by Spain’s Banco Bilbao Vizcaya Argentaria SA of its U.S. business underscores the potential upside even during the global economic slump, say the Bloomberg Intelligence analysts.

HSBC has one of the largest U.S. businesses of any non-American bank, partly a result of its ill-fated acquisition of Household International in 2003, the subprime lender that ended up costing the company billions of dollars in writedowns. Despite its size, the unit’s current $62 billion loan book represents less than 6% of HSBC’s total.

Last year, HSBC hired Citigroup Inc. veteran Michael Roberts as the head of its North American business, replacing Patrick Burke. Months before Roberts’ hire, Ewen Stevenson, HSBC’s chief financial officer, said that the U.S. was one of the areas in which the bank faced its “biggest strategic challenge.”

©2020 Bloomberg L.P.

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