HSBC Holdings Plc Chief Executive Officer Stuart Gulliver, who considers Hong Kong his permanent home, is already paving the way for the bank to move its global headquarters to Asia.
Most of a planned $290 billion reduction in risk-weighted assets will come from the U.K., Europe and Americas, while the bank increases its focus on Asia, HSBC said in a strategy update on Tuesday. The lender plans to relocate the center of its asset management business to Hong Kong from London and eliminate as many as 8,000 jobs in Britain.
“They’re putting themselves in a better position to move to Hong Kong, if they decide to further down the line,” said Gary Greenwood, an analyst at Shore Capital Group Ltd. in Liverpool, England with a sell rating on the shares. “More is moving out there, and, therefore, the hurdle for the transition of their head office out of the U.K. is being reduced.”
Europe’s biggest bank will decide this year whether to relocate its headquarters out of Britain, because of rising tax and regulatory costs, in a move that would take two years to implement. Gulliver, 56, told investors that there are “no sacred cows” as he strives to bolster profitability at the bank battered by a series of scandals and surging compliance expenses.
Investors are urging HSBC and Standard Chartered Plc to consider moving overseas to avoid paying a British levy on banks’ global balance sheets. The tax cost HSBC 750 million pounds ($1.1 billion) last year, more than any other bank, and is one item being considered as the bank’s reviews its domicile.
The shift from London is already under way for the lender’s asset management unit, which oversees about $500 billion, Gulliver said.
“There isn’t an obviously dominant Asian asset manager, so we are going to relocate the sort of center of the asset-management business back to Hong Kong from London because we think there’s a very big growth opportunity,” Gulliver said on a call with investors.
Although HSBC plans to reduce risk-weighted assets in Europe and the Americas, it plans increase them by as much as $230 billion, in Asia, the Middle East and North Africa in consumer banking, wealth management and commercial banking, according to the strategy update.
Gulliver said the lender hasn’t decided whether to sell its U.K. business after separating the unit from trading activities to meet Bank of England “ring-fence” rules designed to prevent it from collapse during a financial crisis.
“The question for us will be around our ability to control the dividend coming from the ring-fenced bank and how complimentary to the strategy of the group” it can be, Gulliver said. The separate U.K. unit will also be re-named, he said.
Gulliver in February said that Hong Kong is his permanent home and that he intends to die there, in a hearing with lawmakers relating to his tax affairs.
“What they’re doing here is major and massive changes to the shape of the business,” said Chris Wheeler, an analyst at Atlantic Equities in London. “The move back to Hong Kong on top of this, compared to what they’re doing across the business is not going to seem that taxing.”