HSBC Holdings Plc (HSBA), the U.K. bank that gets more than half of its profit from Asia, aims to add 2,000 employees in China and Singapore as it accelerates expansion in faster-growing economies, while cutting costs globally.
The London-based bank plans to add at least 200 staff in China annually through 2016, and expand its Singapore workforce by about 1,000 people as wealth migrates there from Malaysia, Indonesia, the Philippines and China, said Peter Wong, chief executive officer for the Asia-Pacific region.
“Opportunities for growth are many in China because all the foreign banks combined only account for 2 percent of the market share,” he said in an interview in Hong Kong yesterday. “It depends on how open the Chinese financial market is going to be.”
Stuart Gulliver, who became CEO in January, plans to lower costs by as much as $3.5 billion over the next two years and reinvest proceeds in the bank’s fastest-growing markets, like South and East Asia. Assets held by rich Asians will more than triple to $16 trillion by 2015 as growing economies add millionaires, according to Swiss bank Julius Baer Group Ltd.
The U.K. bank plans to offer more wealth management products in China, including insurance and equity services to customers with minimum deposits and investments of 500,000 yuan ($77,000), Wong said.
“This will be the main focus,” he said. “We forecast that the combined middle-class population of India and China will exceed the population of the U.S. by 2025.”
The bank now employs more than 5,000 people at its Chinese outlets, with additional staff at processing centers, Wong said.
HSBC shares fell 0.5 percent to 639.3 pence as of 11:13 a.m. in London trading. The shares have risen 1.3 percent this year, compared with a 0.6 percent gain for the 48-member the Bloomberg Europe Banks and Financial Services Index.
Gulliver, 52, said last week the bank plans to reduce costs by $2.5 billion to $3.5 billion by 2013. The bank, Europe’s biggest, wants to reduce its cost efficiency ratio to between 48 percent and 52 percent by 2013 from 60.9 percent in the first quarter of this year.
“There’s growth in Asia’s savings pool, notably in mainland China where wealth is being created and the savings rate is very high. This is also an untapped market,” Paul Lee, a Hong Kong-based analyst at Haitong International Securities Group, said.
It had total operating expenses of $37.7 billion last year. HSBC will cut head office jobs and may sell its U.S. credit card division as it seeks to exit unprofitable units among subsidiaries in 87 countries, the bank said May 11.
“Over the past decade, HSBC has invested a lot of resources in U.S. and Europe, only to see a pileup of bad debts,” said Haitong’s Lee. “They are now shifting the strategy to add investment in emerging markets and eventually revenue will come through.”
Its India and Singapore units reported pretax profit of $679 million and $524 million last year, respectively, according to presentation materials released May 11. Profit before tax in Indonesia was $219 million and in Malaysia totaled $401 million.
“We will continue to hire in India,” Wong said in a Bloomberg Television interview today. He declined to comment on how many staff are being hired in the Southeast Asian nation or how quickly.
Wong also warned today that Hong Kong is “marching toward overheating” as its economy expanded a more-than-forecast 7.2 percent in the first quarter from a year earlier as the government wrestles with accelerating inflation and the threat of a property bubble.
“I think that if unchecked, if property prices continue to go up, there will be a bubble,” he said. “But the government recognizes that and you see there is more release of land lately.”
The city last week sold three residential sites for more than analysts expected, suggesting confidence in the property market. Home prices in March were 3 percent higher than their peak in 1997, the year the Asian financial crisis started, the government said May 13.
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