HSBC can stand strong in a fragmenting world
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
By Liam Proud
LONDON, Nov 7 (Reuters Breakingviews) -When HSBC HSBA.L,0005.HK opened its doors in Hong Kong and Shanghai in 1865, Chinese trade flows were just bubbling up again after the Second Opium War between the ruling Qing dynasty and British and French imperial powers. Tensions between East and West aren’t quite that bad today, but tariff talk and widening geopolitical rifts nonetheless threaten the cross-border banking model epitomised by the UK-based group. How new CEO Georges Elhedery handles those challenges will be closely watched by rival globe-trotting banks such as Citigroup C.N and Standard Chartered STAN.L. There’s every reason to think that the 159-year-old lender can stand strong.
HSBC is the archetypal global bank. Headquartered in London, its biggest market by pre-tax profit is Hong Kong, accounting for just over a third of the 2023 total. No country housed more than a fifth of its 221,000 total employees as of last December, the largest being India at 19%. Insiders like to joke that it is the only bank in the world where most staff are working when the CEO is asleep.
A recent reshuffle by Elhedery, who took charge in early September, underscores the lender’s global nature. Granted, the former finance chief divided the geographic businesses into Eastern and Western clusters, which at first glance looks like a possible prelude for a split. Yet in HSBC’s new structure, those regional divisions are secondary to the main reporting lines – Hong Kong, the United Kingdom, international wealth and corporate and institutional banking. The latter two are global businesses.
The corporate and institutional division, in particular, is inherently cross-border. HSBC facilitated $850 billion of global trade in 2023, according to the bank’s estimates, which is about 4% of the total volume of merchandise trade in that year, based on World Trade Organization figures. The bank disclosed in 2022 that 45% of its wholesale revenue was international, referring to transactions that take place outside of its clients’ home market.
HSBC also estimated at the time that it was collecting about one-fifth of the transaction banking fees up for grabs from Western European, North American and Middle Eastern companies operating in Asia, excluding Japan. Meanwhile, it has said that investment banking and markets clients whose business straddles both East and West offered considerably higher returns for HSBC. Internationally mobile retail banking clients are also twice as lucrative as local ones. In other words, the group’s fortunes are tied to globalisation, and there’s not much Elhedery can do about it.
That might sound like a problem at a time when political and trade tensions are rising between China, the United States and Europe. U.S. President-elect Donal Trump has threatened a 60% tariff on Chinese goods. Beijing and Brussels risk a tit-for-tat over electric-vehicle duties.
Yet the recent past offers hope for Elhedery and his investors. HSBC’s wholesale-focused businesses held up well during the last U.S.-China tit-for-tat starting in 2018, which saw then-President Donald Trump’s administration slap tariffs on $380 billion of products, according to the Tax Foundation. Beijing responded in turn, and by the end of 2019 the new levies covered more than half of bilateral trade, based on calculations by the Peterson Institute for International Economics. At the same time, Trump also hit Europe with tariffs.
The commercial-banking division of HSBC, though, grew at a handy 9% compound annual rate between 2017 and 2019. Admittedly, rising U.S. interest rates over that period helped, but even the most tariff-sensitive bit of the division kept expanding. Revenue from trade and receivables financing grew at 1% in compound annual terms over the same period. Trade-focused revenue in the investment bank, which typically handles larger corporate clients than the commercial division, posted a 4% rate of expansion.
That resilient performance reflects the fact that global import and export volumes kept rising even as tariffs ramped up. Trade as a percentage of global GDP was 27.9% in 2017, before the tit-for-tat, and 28.1% two years later after all the China-U.S. levies, according to World Trade Organization estimates. Even during 2020, when the pandemic locked down much of the world for months, the figure only dipped by a few percentage points. HSBC’s own trade and receivables finance revenue in the commercial bank dipped just 4% that year. The implication is that even as supply chains move around, the overall volume of goods crossing borders is hard to budge.
The historical figures, then, suggest that HSBC has adapted well so far to the new reality of fragmented global trade, where money and goods increasingly move between China and third countries like Vietnam before finding their way to Europe or the United States. In the group’s numbers, this shows up as a decreasing reliance on the People’s Republic. In the first half of 2024, HSBC generated more pre-tax profit in India than mainland China across its commercial banking unit and the global banking and markets division. The two countries were neck and neck a year earlier.
HSBC cannot defy geopolitical forces entirely. Its substantial Chinese operations and its status as one of the largest clearers of U.S. dollar transactions make it vulnerable to pressure from either side. The bank got tangled up in the aftermath of the 2018 arrest of Huawei finance boss Meng Wanzhou in Canada, which eventually cost it business with Chinese state-owned enterprises, Reuters reported. A full-scale U.S.-China showdown could force it to make difficult choices.
Elhedery’s job, however, is to make sure the bank keeps moving with its customers, while staying as far away from politics as possible. Provided the global trading system remains intact, Elhedery will stand a good chance of weathering the geopolitical storm.
Follow @Breakingviews on X
CONTEXT NEWS
HSBC’s new CEO Georges Elhedery on Oct. 29 said that he would present a “business update” in February, detailing his plans for the group that he took over on Sept. 2.
Elhedery on Oct. 22 said that he was restructuring the group along four new business lines: Hong Kong, the United Kingdom, corporate and institutional banking, and international wealth.
The boss of the corporate and institutional unit, Michael Roberts, will also oversee a geographic cluster of businesses known as the “Western markets”, which will comprise the non-retail banking bits of the UK business, continental Europe and the Americas.
David Liao and Surendra Rosha, joint heads of the new Hong Kong unit, will also head the “Eastern markets” geography, which includes all of Asia, Oceania and the Middle East.
HSBC's Indian wholesale unit beats Mainland China https://reut.rs/4fxGWmN
Global trade withstood the Donald Trump-era storm https://reut.rs/4f9vvlA
Geographic breakdown of HSBC 2023 pre-tax profit https://reut.rs/3YeqIbi
Editing by Peter Thal Larsen and Streisand Neto
Các tài sản liên quan
Tin mới
Khước từ trách nhiệm: các tổ chức thuộc XM Group chỉ cung cấp dịch vụ khớp lệnh và truy cập Trang Giao dịch trực tuyến của chúng tôi, cho phép xem và/hoặc sử dụng nội dung có trên trang này hoặc thông qua trang này, mà hoàn toàn không có mục đích thay đổi hoặc mở rộng. Việc truy cập và sử dụng như trên luôn phụ thuộc vào: (i) Các Điều kiện và Điều khoản; (ii) Các Thông báo Rủi ro; và (iii) Khước từ trách nhiệm toàn bộ. Các nội dung như vậy sẽ chỉ được cung cấp dưới dạng thông tin chung. Đặc biệt, xin lưu ý rằng các thông tin trên Trang Giao dịch trực tuyến của chúng tôi không phải là sự xúi giục, mời chào để tham gia bất cứ giao dịch nào trên các thị trường tài chính. Giao dịch các thị trường tài chính có rủi ro cao đối với vốn đầu tư của bạn.
Tất cả các tài liệu trên Trang Giao dịch trực tuyến của chúng tôi chỉ nhằm các mục đích đào tạo/cung cấp thông tin và không bao gồm - và không được coi là bao gồm - các tư vấn tài chính, đầu tư, thuế, hoặc giao dịch, hoặc là một dữ liệu về giá giao dịch của chúng tôi, hoặc là một lời chào mời, hoặc là một sự xúi giục giao dịch các sản phẩm tài chính hoặc các chương trình khuyến mãi tài chính không tự nguyện.
Tất cả nội dung của bên thứ ba, cũng như nội dung của XM như các ý kiến, tin tức, nghiên cứu, phân tích, giá cả, các thông tin khác hoặc các đường dẫn đến trang web của các bên thứ ba có trên trang web này được cung cấp với dạng "nguyên trạng", là các bình luận chung về thị trường và không phải là các tư vấn đầu tư. Với việc các nội dung đều được xây dựng với mục đích nghiên cứu đầu tư, bạn cần lưu ý và hiểu rằng các nội dung này không nhằm mục đích và không được biên soạn để tuân thủ các yêu cầu pháp lý đối với việc quảng bá nghiên cứu đầu tư này và vì vậy, được coi như là một tài liệu tiếp thị. Hãy chắc chắn rằng bạn đã đọc và hiểu Thông báo về Nghiên cứu Đầu tư không độc lập và Cảnh báo Rủi ro tại đây liên quan đến các thông tin ở trên.
