HSBC Holdings Plc (HSBA) agreed to sell its Japanese private banking business to Credit Suisse Group AG (CSGN) as Europe’s largest bank by market value cuts assets to reduce expenses and prepare for tighter capital rules.
The sale of the unit, which had assets under management of $2.7 billion as of Oct. 31, is expected to be completed in the second quarter of next year, London-based HSBC said in a statement today, without disclosing the price.
Chief Executive Officer Stuart Gulliver is reversing HSBC’s expansion over the past two decades, selling assets and cutting jobs as the European debt crisis saps profit and global regulators boost capital requirements. The bank in July agreed to sell almost half its U.S. branches to First Niagara Financial Group Inc. for about $1 billion and has also sold part of its Russian consumer banking unit.
“This is clearly not a fire sale,” Sandy Mehta, the Hong Kong-based CEO of Value Investment Principals Ltd., said today in a telephone interview. “It’s a relatively low-growth area for them. If they sell it at a reasonable valuation, that is very positive for HSBC.”
HSBC rose 0.4 percent to 485.65 pence at 8:48 a.m. in London trading, paring the stock’s decline this year to 25 percent. Credit Suisse gained 0.8 percent to 21.79 Swiss francs in Zurich.
Credit Suisse is seeking to expand its wealth-management business in the Asia-Pacific region, where the Zurich-based firm managed 77.6 billion francs ($83.6 billion) for clients at the end of September. The bank managed 762.1 billion francs for rich customers globally.
Credit Suisse started its onshore private banking business in Japan in 2009, focusing on business with ultra-high-net-worth individuals. HSBC’s unit will be combined with the Swiss bank’s existing division to expand client coverage through the integration of offices in Osaka and Nagoya and increase profitability, Credit Suisse said.
“Private banking continues to be one of Credit Suisse’s key engines of growth and value, and Asia offers tremendous potential in wealth management,” Marcel Kreis, Credit Suisse’s head of private banking in Asia Pacific, said in a statement. “We are firmly committed to enhancing our existing regional private banking footprint and are committed to dedicating the appropriate investment and resources to ensure the long-term success of our business.”
Japan’s high-net-worth wealth pool of $4.63 trillion increased almost 7 percent in 2010 from the previous financial year, according to Scorpio Partnership, an adviser to wealth management institutions and family offices.
The number of millionaire households worldwide increased by 12 percent in 2010 to about 12.5 million, led by the U.S. and followed by Japan, according to the Global Wealth Report released by Boston Consulting Group in May.
HSBC is seeking buyers for its non-life insurance assets and may consider selling regional units of the business separately, three people familiar with the matter told Bloomberg News in October. The sale may value the non-life operations at $1 billion to $1.5 billion, they said, asking not to be identified because the sale process is private.
HSBC aims to cut as much as $3.5 billion of expenses over the next two years as it tackles wage inflation in faster- growing economies and prepares for stricter capital rules, the bank said in May.