HSBC to Sell Banking Unit in Japan - Analyst Blog
December 21 2011 - 7:15AM
Zacks
In yet another attempt to revamp its operations, stabilize
capital levels and improve efficiency, HSBC Holdings
Plc (HBC) has announced the plan to sell its private
banking unit in Japan to Credit Suisse Group (CS).
This is a part of the company’s long-term strategy to bring down
its operating expenses. Back in May 2011, the CEO of the company
had announced plans to reduce the operating expenses by $3.5
million by the end of 2013 through restructuring and contraction of
its global business.
The sale price of the Japanese unit was undisclosed by HSBC;
however, the company has stated that the gross value of the assets
were $2.7 billion as of October 31, 2011. The deal, which is
expected to be closed by mid-2012, is still subjected to regulatory
approvals.
However with this step, HSBC is not completely withdrawing its
businesses from Japan. The company will continue to offer its
services to those clients who have more than ¥10 million ($0.13
million) in assets through HSBC Premier.
According to Credit Suisse, the acquisition of HSBC’s private
banking unit in Japan will improve its wealth management
capabilities. Further, the deal would nearly double the number of
employees (at present about 80) at its private banking unit. Japan
is an attractive market for institutional investors. Hence Credit
Suisse is aiming to expand in Japan to grab the upcoming
opportunities.
However, over the last several months, HSBC has been shedding
its non-core assets and trimming down workforce to control its
expenses. In August, the company announced 30,000 layoffs over the
next two years. Additionally, HSBC has exited its retail banking
businesses in Chile, Canada, Poland and Russia. Further, the
company has also announced the sale of its 195 non-strategic
branches to First Niagara Financial Group Inc.
(FNFG) for $1 billion in cash and its U.S. credit card business to
Capital One Financial Corporation (COF) for $32.7
billion.
Along with long-term benefits, the divestiture of the Japanese
private banking business will help the company concentrate on its
core business. Moving further, we expect the company to continue
with such strategic sale of business units.
Currently, HSBC retains a Zacks #5 Rank, which translates into a
short-term ‘Strong Sell’ rating. Also, considering the
fundamentals, we are maintaining a long-term “Underperform”
recommendation on the stock.
CAPITAL ONE FIN (COF): Free Stock Analysis Report
CREDIT SUISSE (CS): Free Stock Analysis Report
FIRST NIAGARA (FNFG): Free Stock Analysis Report
HSBC HOLDINGS (HBC): Free Stock Analysis Report
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