The European head of HSBC is banking on the increasing wealth in the region and the expansion of Asian corporate clients overseas to enhance the unit’s contribution to group profits.
This follows a multi-year revitalization that has transformed the business from a laggard to a profit generator.
The turnaround in Europe, details of which are being disclosed here for the first time, has helped HSBC overcome investor doubts regarding its “network strategy.”
This came after a 2022 campaign by the top shareholder, Ping An Insurance Group of China, which raised concerns about whether HSBC’s rapidly growing Asian business was being hindered by its substantial presence in slower-growth Western markets.
Central to the strategy is the belief that large corporate clients in Asia, many of whom already engage with HSBC for borrowing, will utilize a broader range of its services in Europe as they expand into the region. Additionally, they will seek advice on local transactions and fundraising.
Colin Bell, the CEO of HSBC Europe, highlighted the bank’s intention to profit from revenue directed to Europe from other HSBC hubs. Bell emphasized a focus on increasing income from ultra-high-net-worth families.
“With international wholesale banking at the core, we are much more targeted from a strategic standpoint,” Bell stated, citing a rise in return on tangible equity from below 1% in 2019 to 6.7% in 2023 at HSBC Europe, which contributes nearly a tenth of HSBC’s total profit.
“We’re starting to see the results of all that work in the numbers.” Despite Ping An’s call for the bank to spin off its more profitable Asia business, other investors have dismissed the demand.
Analyst Alastair Ryan of Bank of America noted that investors have ceased to question the bank’s network strategy for the time being.
Bell, who joined HSBC in 2016 after serving as a British army officer, was tasked with revitalizing the long-struggling European business.
Between 2019 and 2023, HSBC Europe saw annual profit before tax grow to $2.6 billion from $1 billion, largely driven by reducing its headcount to 10,600 from approximately 17,000 and divesting businesses such as its French retail banking unit.
The bank also reported a 40% increase in revenue originating in Europe but booked elsewhere in its global network, reaching $3 billion in 2023 compared to 2022.
Bell remains confident in the potential for further business growth. He believes bullish clients with surplus capital in Europe may seek expansion opportunities in regions such as Southeast Asia as supply chains undergo restructuring.
Additionally, firms from India, China, and other parts of Southeast Asia are exploring opportunities in Western markets.
To achieve its objectives, HSBC plans to increase assets under management at its Swiss-based wealth unit by 50% over five years, prioritizing ultra-high-net-worth clients.
The bank also aims for significant growth in its Channel Islands and Isle of Man business, with assets under management expected to increase by around 70% in five years, coupled with targeted recruitment efforts.
“We’ve been undergoing a complex, intensive transformation in Europe for the past three years,” said Bell.
“Now it’s time to engage with clients and have the right conversations about the capabilities we possess.”
