SAN FRANCISCO: HSBC announced that it is exiting the retail and small business banking market in the United States, in line with its strategy to refocus on corporate and investment banking in Asia.
The London-headquartered, Asia-focused giant intends to “focus on the banking and wealth management needs of globally connected affluent and high net worth clients,“ it said in a statement late Wednesday.
Of its 148 US branches, 90 are to be sold, including to Citizens Bank and Cathay General Bancorp.
The bank plans to turn about 20 locations into international centres dedicated to high net worth individuals, and gradually wind down the remaining 35-40 branches.
“They are good businesses, but we lacked the scale to compete,“ said Noel Quinn, the group’s chief executive, in the statement.
“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.”
HSBC had announced earlier this year that it intended to restructure its US retail and small business operations.
HSBC unveiled in February a revised strategy focused mainly on wealth management in Asia, and at the same time said it was “exploring organic and inorganic options” for its US retail banking franchise.
As part of Quinn's gameplan that also involved slashing costs across the banking group, the London-headquartered bank has been looking to step back from sub-scale markets and businesses.
HSBC is also seeking to sell its French retail banking operations as part of the same strategy, and has entered final negotiations to sell that business to private equity firm Cerberus, Reuters reported in March.
In France, according to the daily Les Echos, it is preparing to pay more than €1 billion (RM5 billion) to the American fund Cerberus to sell all of its retail banking activities, a network of 230 bank branches and 4,000 employees.
Citizens Bank, part of Citizens Financial Group, has agreed to buy HSBC's east coast personal and small business banking business including 80 branches, and Cathay Bank, a unit of Cathay General Bancorp, has agreed to buy its west coast business including 10 branches, according to HSBC and separate statements from the two US-headquartered banks.
“These transactions, whilst very small in the context of HSBC group, should contribute to streamlining the group,“ analysts at Jefferies wrote in a note on Thursday. They added, though, that the bank is expected to still face some investor pushback as it is not completely exiting US retail.
HSBC said it expected to incur pre-tax costs of US$100 million (RM414 million) connected with the transactions, after which it does not expect to generate a significant gain or loss.
HSBC's US wealth and personal banking business made a loss of US$547 million in 2020, according to the bank's annual results, versus a US$5 billion profit in Asia, primarily from Hong Kong, its most profitable market.
Its global banking and markets division, which includes its investment banking and large corporate businesses, made a profit of US$573 million in the United States in 2020.
HSBC expanded into US retail banking in the 1980s as part of a broader strategy to diversify its geographical focus. However, it has been trying to walk back on this for more than a decade, and in 2011 announced the sale of nearly half of its then 470 US branches, mostly in upstate New York, and also its profitable US credit card arm.
HSBC had acquired that credit cards business as part of its disastrous US$14 billion purchase of US consumer lending firm Household International in 2003, which triggered billions of dollars of subprime mortgage losses, and an eventual US$1.6 billion payment to settle a class-action lawsuit. – AFP, Reuters
