HSBC has announced that it is exiting the U.S. retail banking mass market by selling its loss making business in parts and closing other parts. This move has been expected for a long time since HSBC is attempting to focus on Asia which is its biggest market.
HSBC Exits U.S.
HSBC is the biggest bank in Europe, but it has been attempting to reduce its presence in North American and European markets for years since it had been struggling with competition from large local banks. HSBC released a statement this week saying it is leaving retail banking for most small business and individual customers. They will however continue to retain some wealthy and international clients while maintaining a tiny physical presence in the United States.
HSBC had unveiled its strategy in February about focusing on wealth management on the continent of Asia. It had also shared about exploring inorganic and organic choices for its U.S. retail banking franchise. Moving forward with their plan to reduce costs, HSBC is looking to take a step back from small businesses and markets in London. The bank is also attempting to sell its retail banking operations in France to Cerberus. Final negotiations for the same have been going through for months.
HSBC Profits and Losses
HSBC has also shared that it is selling its east coast small business and personal banking business to Citizens Bank which is a part of Citizens Financial Group. HSBC is selling over 80 branches to Citizens Bank. HSBC is also selling its west coast business to Cathay Bank, a part of Cathay General Bancorp, which is getting over 10 branches.
When you take HSBC into context, these deals may appear small but they will help the bank streamline itself. The bank however is expecting to face pushback from investors since it has not exited U.S. retail completely. The bank is also expected to pay pre-tax expenses of $100 million in connection to these transactions. After these costs, HSBC will barely generate a loss or gain.
As per HSBC’s annual results, its U.S. personal banking and wealth business incurred a loss of $547 million last year. However, it enjoyed a profit of $5 billion in Asia, mainly in Hong Kong which is its highest profitable market. HSBC’s markets and global banking division including its large corporate and investment banking businesses enjoyed a profit in the United States in 2020 of $573 million. Before they retreated, HSBC’s shares in Hong Kong rose by 0.8% which was a three month high.
Troubles in the U.S.
HSBC expanded in the 1980s into the United States retail banking sector to diversity its strategy and geographical focus. However, HSBC has been trying to undo this step for more than 10 years now. The bank announced a sale of over 50 percent of its branches in the US in 2011. They had over 470 branches which were mostly located in upstate New York. They also announced the sale of their U.S. credit card sector which was profitable.