HSBC's Assaf Says More London Jobs May Stay on Softer Brexit

(Bloomberg) -- HSBC Holdings Plc’s investment bank chief Samir Assaf said a hard Brexit is now unlikely after the U.K. election, and that could mean more jobs staying in London.

A softer Brexit would be “very good news for us, because it will be less hassle and we would be able to do much more things from London,” Assaf said at an investor presentation on Thursday.

Prime Minister Theresa May is coming under pressure to ditch her plans for a hard Brexit after failing to win a majority in last week’s general election. While she hasn’t signaled a change in approach so far, the result has raised the prospect she’ll do more to maintain trade ties with the European Union.

HSBC Chief Executive Officer Stuart Gulliver has previously said he would probably move about 1,000 employees from the bank’s offices in London to Paris to handle European trading activities. Assaf said that was still an option if a hard Brexit were to happen, while the bank can benefit versus many of its competitors because it already has long-established operations in European countries such as France and Germany.

Assaf said no matter what shape Brexit takes, the one-time cost of moving employees will be “negligible” in the context of the bank’s results.

“We haven’t spent much money yet,” Assaf said. “We’ve only made plans.”

The firm is also seeing business potential to service other banks that don’t have operations in continental Europe. Diane Reyes, who runs HSBC’s global liquidity and cash management business, said her unit has seen 90 new client opportunities as other financial institutions seek payments and clearing options after Brexit, including from Asian banks whose only European presence is in London.

“They not only have to apply for licenses, but also develop infrastructure,” she said. “Our capabilities are an easier road for them to go through.”

Growth Goals

HSBC reiterated a goal of “mid-single-digit” growth in banking and trading revenue as economic growth and interest rates boost performance across the industry, according to a presentation on the lender’s website. The securities unit grew income at an annual rate of about 5 percent over the past two years, it said.

One area the bank has earmarked for investment is equity capital markets -- helping companies list on stock exchanges and raise cash via share sales -- co-head of global banking Matthew Westerman said at the event. The bank has “more to do to improve” and is seeking continued growth in Europe and the Middle East and to maintain its top-three ranking in the Asia region, the former Goldman Sachs Group Inc. partner said.

Assaf plans to trim another $20 billion of risk-weighted assets from his division, the company said after slashing almost $100 billion since 2015. HSBC aims to make a return of more than 2.5 percent on the remaining assets, an increase of 0.7 percentage point from last year but did not say when it expects to achieve this target.

“HSBC should benefit from improving net interest margins on rising U.S. rates and strong loan growth on a superior emerging market macro outlook,” Ronit Ghose, an analyst at Citigroup Inc. with a buy rating on the stock, said in a note. “We forecast revenue growth of only 2 to 4 percent a year and broadly stable costs,” but “if HSBC can deliver its targets this points to possible upgrades.”

To contact the reporters on this story: Richard Partington in London at rpartington@bloomberg.net, Stephen Morris in London at smorris39@bloomberg.net.

To contact the editors responsible for this story: Michael J. Moore at mmoore55@bloomberg.net, Jon Menon