Given that global private banking (GPB) only accounts for around two percent of HSBC Holding’s risk weighted assets (RWA) it might not be expected to get a mention, let alone feature, in the Hong Kong and London-based bank’s latest strategic review.
But in the update given on 11 June by John Flint, HSBC’s group chief executive, global private banking, along with wealth and asset management, certainly does feature.
The only problem is, however, that the focus appears to be limited exclusively to Asia. The rest of the world and, more pertinently the UK, doesn’t merit a mention in a review that heralded HSBC’s intention to “get back into growth mode” after what has sometimes seemed to be a protracted period of retrenchment and restructuring.
“After a period of restructuring it is now time for HSBC to get back into growth mode,” said Mr Flint in a statement. “The existing strategy is working and provides a strong platform for future profitable growth.
“In the next phase of our strategy we will accelerate growth in areas of strength, in particular in Asia and from our international network. We will leverage our size and strength to embrace new technologies, investing US$15-17 primarily in growth and technology, subject to achieving positive adjusted jaws (sic) each financial year.”
This is logical and makes good sense. For the fact is that global private banking, and especially the Swiss operation, has been a major source of woe to HSBC for most, if not all, of the current decade.
Far from providing a source of profitable growth the private banking purchases made by HSBC two decades ago in what appeared at the time to be an acquisitions binge have turned out to be a nightmare with client assets, revenues and HSBC’s reputation plummeting and losses, until recently, mounting.
Of course some of this has reflected the restructuring measures put in place by HSBC not least a “de-risking” policy that effectively amounted to a significant number of clients being shown the door coupled with a greater focus on core growth markets.
The reality is that Asia in general and Hong Kong in particular has provided just about the only the only bright spot in HSBC’s global private banking empire for the obvious reasons.
Economic growth and prosperity along with personal wealth has remained buoyant within the region and will continue to do so, nuclear wars and natural disasters notwithstanding, for the foreseeable future.
Going forward HSBC has identified a number of specific opportunities and areas of investment in Asia within the private bank and the wealth management segment of the retail bank.
From Hong Kong it aims to increase its market share in the very wealthy segment across Greater China. Within China itself the primary focus will be on building out its “Jade” proposition which will be underpinned by investment in relationship managers and the product platform.
From Singapore HSBC intends to accelerate client coverage and increase relationship manager growth across all segments including ASEA “new-to-bank”/referred clients” and Chinese offshore wealth.
Leveraging transactional banking, digital, discretionary portfolio management and lending are all considered to offer profitable opportunities.
HSBC’s insurance-related activities will also be expanded with the product range developed to address the needs of new wealth customers, not least in mainland China.
Leveraging coverage of global banking and markets and commercial banking customers, together targeted net new money growth from global private banking and retail banking and wealth management customers should also generate additional opportunities for HSBC’s asset management businesses, not least in mainland China.
So does all this mean that HSBC’s UK-related private banking and wealth management activities will be effectively on hold?
Not necessarily, for HSBC has identified the UK mortgage market as an area for growth.
The group’s retail banking and wealth management (RBWM), rather than GPB will probably make the running here.
But it should be kept in mind that this division encapsulates customer groups that would probably qualify for private banking services at other institutions.
And as the example of Coutts has shown, where a considerable portion of its revenue growth in recent years has emanated from an explosion in its mortgage-related activities, this fits in quite neatly with the private banking and wealth management oeuvre.