Fiscal Fitness: HSBC Gets Its Business Back In Shape

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HSBC city skyline

HSBC Holdings PLC is the world’s seventh largest bank by total assets and the largest in Europe, with total assets of $2.374 trillion as of December 2016.

The British holding company has around 4,000 offices in 70 countries and territories across Africa, Asia, Oceania, Europe, North America and South America, but considers the United Kingdom and Hong Kong its “home markets.”

Serving approximately 37 million customers, HSBC, post-Brexit, plans to relocate 1,000 staff members from London to Paris along with roughly one-fifth of its London-based investment bankers.

Reporting better-than-expected Q2 earnings, the bank generates much of its profit in Asia—where it has strong ties dating back to its launch as the Hong Kong Shanghai Bank. Profits of $3.9 billion in the second quarter, compared with $2.5 billion in the second quarter of 2016, exceeded analysts’ expectations.

It’s in the midst of a massive reshaping of its business. For the past two years, HSBC has fine-tuned its operations, eliminating unneeded roles, selling off 100 underperforming businesses, exiting 18 countries and reducing its global investment banking business.

The transformation program has to date resulted in $4.7 billion in annualized savings, with highlights such as quicker loan approvals noted on its Q2 report:

HSBC Q2 2017 milestones

“We have made an excellent start to 2017, reflecting the changes we have made since our investor update in 2015 and the strength of our competitive position,” HSBC CEO Stuart Gulliver stated. “Our three main global businesses performed well, generating significant increases in both reported and adjusted profit before tax, and gaining market share in many of the products that are central to our strategy.”

Mark Tucker, CEO of Asian insurer AIA Group, will replace chairman Douglas Flint when he steps down in October. Gulliver’s six-year turnaround of HSBC Holdings Plc has led to adjusted revenue and pretax profit, up 4% and 13% respectively.

“We’ve got revenues heading in the right direction across all our major businesses and regions” and are in a “very strong capital position,” HSBC’s Finance Director Iain Mackay told Bloomberg.

“The shape of our global banking and markets business is somewhat different than some of the others,” Gulliver said. “A large chunk of it is shaped towards corporates not financial institutions and obviously, corporates have to do things every day irrespective of whether markets are good, bad or indifferent, so they are far more stable and predictable.”

As part of its transformation, fintech investments are vital to keep the brand at the forefront of customer experience. HSBC is one of seven of Europe’s largest banks using IBM’s Digital Trade Chain, blockchain technology to expedite international trade for small and medium-size enterprises. The tech solution builds on Hyperledger Fabric, an open source blockchain framework, scheduled to go live by year’s end.

It’s exploring using biometrics and other non-traditional methods to make banking seamless yet secure. It’s also thinking hard about the changes in consumers’ lives, from how they live, interact and work to the meaning of home.

In June, HSBC launched the HSBC Connections Hub, a digital platform enabling business customers to leverage the bank’s global network of buyers and sellers worldwide. Businesses in Canada, China, Hong Kong, India, Mexico, Singapore, the UK and the US can sign up to the multilingual HSBC Connections Hub for free.

Richard Davies, Global Head of Propositions for HSBC Commercial Banking, commented on the global social platform: “Researching and connecting with new business partners can be a daunting task, and one that gets harder with distance.”

“We have designed the HSBC Connections Hub to help break down barriers for companies of all sizes that aspire to forge new business relationships at home and overseas. Every business interacting through the Hub is an HSBC customer, giving users confidence that they already have one practical connection in common.”

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