Fitch Questions Gulliver’s HSBC Plan, Signals Downgrade Risk

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Fitch Ratings Ltd. questioned Chief Executive Officer Stuart Gulliver’s three-year plan to boost HSBC Holdings Plc’s profitability by expanding in Asia, saying it could spark a downgrade.

The plan, which includes cutting as many as 25,000 jobs, would only have a positive impact if the lender “outperforms on the execution of its strategy” while boosting “capitalization significantly,” Fitch said Thursday. “In particular, how HSBC manages its significant planned growth in China and south-east Asia could hurt the ratings if this leads to a higher overall risk profile and concentration.”

Gulliver, 56, is looking to restore investor confidence in Europe’s largest bank, which has been battered by scandals and surging compliance costs. His plan announced on Tuesday includes cutting staff by about 10 percent, selling operations in Turkey and Brazil, stepping up investment in Asia and expanding asset management and insurance in places such as China’s Pearl River Delta.

In contrast to Fitch, Moody’s Investors said Thursday that Gulliver’s actions would have “no material effect on its risk profile or immediate bearing on its ratings” and were consistent with the bank’s realigned strategy.

The rating company reiterated that it expects HSBC will be able to meet its “elevated” capital requirements through retained profit.

The shares were little changed in London trading at 612.5 pence by 10:17 a.m. They are up 0.6 percent this year, while Standard Chartered Plc, which also generates most of its revenue in Asia, is up 12 percent.

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