HSBC leaves loss-making US retail bank as part of Asia Pivot
HSBC (HSBA.L) has announced that it is pulling out of mass market retail banking in the United States by selling parts of the losing business and cutting others, a long overdue move as the lender is stepping up its focus on Asia, its largest market.
The largest European bank has been trying for years to reduce its presence in certain European and North American markets where it has fought against competition from the largest national players.
The bank said in a statement Wednesday that it would quit retail banking for most personal and small business customers, but would retain a small physical presence in the United States to serve its affluent and very wealthy international customers.
“They are good companies, but we did not have the size to compete,” Noel Quinn, CEO of HSBC Group, said in the statement.
HSBC in February unveiled a revised strategy focused primarily on wealth management in Asia, while saying it was “exploring organic and inorganic options” for its US retail banking franchise.
As part of Quinn’s game plan, which also involved cutting costs across the banking group, the London-based bank sought to step back from the markets and subscale businesses.
HSBC is also looking to sell its retail banking business in France as part of the same strategy and has entered final negotiations to sell this business to private equity firm Cerberus, Reuters reported in March.
Citizens Bank, part of the Citizens Financial Group (CFG.N), has agreed to buy out the east coast personal and small business banking operations of HSBC, including 80 branches, and Cathay Bank, a unit of Cathay General Bancorp (CATY.O), has agreed to buy its West Coast business, including 10 branches, according to HSBC and separate statements from the two banks headquartered in the United States.
“These transactions, although minimal as part of the HSBC group, should help streamline the group,” Jefferies analysts wrote in a note Thursday. They added, however, that the bank is still facing some investor pullback as it does not completely exit US retail.
HSBC said it expects to incur pre-tax transaction costs of $ 100 million, after which it does not expect to generate a significant gain or loss.
HSBC’s wealth and personal businesses in the United States recorded a loss of $ 547 million in 2020, according to the bank’s annual results, compared with a profit of $ 5 billion in Asia, mainly in Hong Kong, its market. more profitable.
Its World Bank and Markets division, which includes its investment banking and large corporations, made a profit of $ 573 million in the United States in 2020.
The bank’s Hong Kong-listed shares rose 0.8% to a three-month high, before falling.
PROBLEMS IN THE UNITED STATES
HSBC expanded into retail banking in the United States in the 1980s as part of a broader strategy to diversify its geographic focus.
However, it has been trying to reverse this point for more than a decade and in 2011 announced the sale of nearly half of its then 470 U.S. branches, mostly in upstate New York, as well. than its profitable credit card subsidiary in the United States.
HSBC acquired this credit card business as part of its disastrous $ 14 billion purchase of U.S. consumer finance company Household International in 2003, which triggered billions of dollars in subprime mortgage losses. and a possible payment of $ 1.6 billion to settle a class action lawsuit.
The bank currently has an American network of 148 branches.
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