HSBC to Wind Down South Korea Retail Bank Amid Global Revamp

HSBC Holdings Plc (HSBA) plans to wind down its retail banking and wealth management business in South Korea as it seeks to revive profitability.

Europe’s biggest lender plans to close 10 of its 11 branches in Korea pending regulatory approval, according to a statement from the London-based bank today. HSBC “remains committed” to Korea, where it will focus on its global banking and markets business, it said.

Plans by the U.K. lender to withdraw from retail banking in Korea suffered a blow when KDB Financial Group Inc. last year abandoned talks to take over the operation. HSBC Chief Executive Officer Stuart Gulliver has closed or sold at least 52 businesses since he took the job in 2011, including retail operations in 17 markets, according to the statement.

Consumer banking in South Korea has been constrained by rising household debt that’s also burdening the economy. Borrowing and credit purchases by Koreans swelled to a record 963.8 trillion won ($844 billion) at the end of 2012, central bank data show.

President Park Geun Hye, who took office in February, set up a fund that is aimed at easing households’ debt loads by purchasing and rescheduling overdue loans.

South Korean regulators are reviewing HSBC’s application, according to an e-mailed joint statement from the Financial Services Commission and Financial Supervisory Service.

Shares of HSBC rose 0.7 percent in London to 716 pence at 9:24 a.m., outperforming the 0.3 percent gain in the benchmark FTSE 100 Index and taking their gain this year to 11 percent.

Three Attempts

HSBC has failed in at least three attempts to build up its Korean retail business since it began operations in 1998. In 1999, the U.K. lender walked away from talks with the Korean government to buy SeoulBank. In 2005, it lost a bid for Korea First Bank to Standard Chartered Plc. HSBC also abandoned a $6 billion bid to acquire Korea Exchange Bank in 2008 after authorities left the transaction in limbo for more than a year.

HSBC in April sold the stake it bought in 2007 in South Korea’s Hana HSBC Life Insurance Co. back to Hana Financial Group Inc. (086790)

The bank plans to keep a branch in the country to serve existing retail clients and its global banking and markets business, according to the statement. HSBC, whose history in Korea dates back to 1897, had 25 trillion won of assets in the country as of the end of 2011, according to its website.

KDB, South Korea’s largest state-owned banking group, said last year that talks on buying HSBC’s local retail business broke down because of conditions related to employment. KDB in April 2012 had agreed to buy the lender’s assets and debt at 11 South Korean branches.

To contact the reporter on this story: Stephanie Tong in Hong Kong at stong17@bloomberg.net

To contact the editor responsible for this story: Chitra Somayaji at csomayaji@bloomberg.net

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