- HSBC's plan to cut 35,000 jobs and offload $100 billion in assets by the end of 2022 would have to wait if the coronavirus crisis drags on, four sources told the Financial Times.
- The bank would prefer to meet face to face with clients with whom it seeks to cut ties. But distancing measures, or effective lockdowns in some countries, are making this goal impossible, the publication reported.
- Despite the outbreak, the bank is confident it can triple its number of billionaire clients in Greater China over the next three years, an HSBC executive told Bloomberg.
HSBC is not the only major European lender in the midst of a drawdown as the coronavirus crisis globalizes. Deutsche Bank last year announced plans to shed 18,000 jobs and to create a "bad bank" to spin off $83 billion in unwanted assets.
However, a precipitous drop in market valuations may make it inopportune for any bank to sell assets it no longer wants.
"We would have to package up exposures and sell them at rock bottom prices: it would be unattractive and unnatural to push that through right now," a person familiar with HSBC’s plans told the Financial Times. "A whole lot of what we have to do, such as offloading clients and reducing risk-weighted assets can’t be done in this environment."
The bank could continue to identify expendable clients and assets, but even that may face delays if executives' attention is needed on coronavirus-related matters, one source said. Additionally, any move to separate from clients may face blowback as regulators have asked banks to do all they can to support companies affected by the outbreak.
"If you’re a regulator, you’ll be saying to banks, 'Guys, all those grand restructuring plans you had — forget about them and focus on the day-to-day,'" a person familiar with the situation told the Financial Times.
The virus has forced some HSBC employees to work from home — a prospect that may also complicate the bank’s effort to downsize in the short term.
"You can’t fire a trader in Europe over the phone when he is either working from home or taking care of a sick family member," an HSBC source told Reuters.
HSBC, in its annual earnings release last month, said it would scale back its presence in the U.S. and mainland Europe, instead investing more in its Asian and Middle Eastern operations.
Indeed, the time it was taking HSBC to revive growth in Asia allegedly led to the ouster of the bank’s former CEO, John Flint, in August. The bank tapped its interim CEO, Noel Quinn, to take the top role permanently Tuesday.
However, in last month’s release, HSBC Chairman Mark Tucker said the bank lowered its estimate for Asia growth in 2020 as a result of the virus.
Despite that, Tan Siew Meng, the bank’s Asia Pacific head of global private banking, sees Asia’s ultra-high net worth clientele as a "very, very critical piece" to HSBC’s growth strategy.
"Even if 2020 is going to be impacted [by the virus], the trajectory will come back," Tan told Bloomberg. "It will pick up again when business activity or when travel starts to resume. We are not concerned."
About 75% of the private banking unit’s $151 billion in Asian client assets last year came from the segment that serves customers with $30 million or more to invest, Bloomberg reported. And about 60% of client referrals to the private bank in Asia last year came from within the group, Tan said.