In HSBC's Global Play, U.S. Will Act In A Supporting Role
August 01 2011 - 5:02PM
Dow Jones News
When most of its U.S. restructuring is done next year, HSBC
Holdings Plc's (HBC, HSBA.LN ) operations here may well be
generating capital for the global banks' expansion elsewhere in the
world.
"We are becoming much more disciplined about how we allocate
capital, and that is one of the reasons why we allocate much more
capital to faster-growing emerging markets," Niall Booker, chief
executive of HSBC North America Holdings Inc., said in an interview
Monday. "When you are making returns on equity of 20% in Asia and
maybe slightly higher in the Middle East, that makes a lot of
sense."
For a company that wants to focus on commercial customers that
need an international bank for their cross-border business, and
retail customers who travel and like to live in foreign countries,
the United States remains an important market.
But HSBC no longer emphasizes the U.S. as a growth market, and
is shrinking its U.S. consumer-lending businesses, which have been
the fastest-growing part of U.S. banking.
HSBC has disclosed some serious restructuring plans in recent
days. On Sunday, HSBC said it struck a deal to sell 195 upstate New
York branches to First Niagara Financial Group Inc. (FNFG) for $1
billion. HSBC will continue to operate branches in cities including
New York and Washington, D.C.
On Monday, the big London-based bank said it would cut 30,000
jobs to become more efficient.
Booker declined to specify how many of the job cuts would be in
the U.S. "We've been reducing headcount in the U.S. for a
considerable period of time. That restructuring continues" even
after the branch sale. HSBC decided in 2009 to shutter its subprime
consumer-lending business, closing the remaining 800 branches and
cutting 6,000 jobs in the U.S.
Now, "we've got the [credit-]card business under review," he
said. Capital One Financial Corp. (COF) is one of the businesses
that made an offer to buy HSBC's credit-card business, people
familiar with the matter have said.
HSBC also said Monday that its pre-tax profit in the first half
of this year rose 3.3% from a year earlier, to $11.5 billion,
though revenue remained virtually flat at $35.7 billion.
Whether the bank is going to release capital from the U.S. and
when will depend how regulators feel about moving capital generated
in the U.S. to other countries, how fast HSBC feels it might be
able to grow the U.S. business that remains after its massive
restructuring, and, of course, on improvement in the troubled U.S.
mortgage business that has hurt HSBC badly.
HSBC's plan to expand in emerging markets is remarkably similar
to that of Citigroup Inc. (C). "I have one other competitor, and
that is Citi," Booker said. "They are a feared competitor, but
there is only one of them."
Like Citi, HSBC had already decided to chop off businesses that
don't fit with its more narrow banking strategy after the financial
crisis.
When the heavy lifting for HSBC's U.S. restructuring is done in
2012, Booker said, HSBC will focus on four business lines: lending
to middle-market companies in the U.S. that do business
internationally; capital markets; wealth management; and retail
banking in major metropolitan markets.
Booker said he is particularly optimistic about commercial
banking. "Manufacturing [is] enjoying a little bit of a resurgence
with a weaker dollar, with government policy focusing on the
manufacturing industry and with real wages remaining very flat in
the U.S."
-By Matthias Rieker, Dow Jones Newswires; 212-416-2471;
matthias.rieker@dowjones.com
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