HSBC, Nomura Fall in Asia as Brexit May Force Costly London Move

  • Nomura shares complete biggest two-day drop since March 2011
  • Banks operating in London face ‘perfect storm’: McGonegal

HSBC Holdings Plc and Nomura Holdings Inc. extended declines in Asian trading Monday on concern that Britain’s vote to leave the European Union may force banks with a large presence in the U.K. to undergo costly relocations.

Nomura tumbled 6.3 percent at the close in Tokyo after losing 11 percent Friday, the biggest two-day slump since the aftermath of the nation’s March 2011 tsunami. London-based HSBC dropped as much as 2.6 percent in Hong Kong after sliding 6.6 percent Friday. Shares in Asian banks with less exposure to Europe generally held up better on Monday.

HSBC’s Stuart Gulliver is among bank chiefs who have warned that they may have to shift jobs from the U.K. to elsewhere in Europe in the event of a Brexit vote. The U.K. quitting the EU raises the prospect of financial firms operating out of London losing so-called passporting rights that allow access to the region’s single market.

“All banks that have major headquarters in the U.K. will have to consider moving personnel and headquarters into the EU if they plan to continue doing business there,” said Brett McGonegal, chief executive officer of Capital Link International. The combination of a negative profit outlook for the London banking sector and the huge cost of relocating people amounts to a “perfect storm,” he said.

For an article on where bankers in London might relocate to, click here.

Tokyo-based Nomura, which had more than 2,500 employees in London as of March, said Friday that it set up a team to examine the implications of U.K. voters’ decision and will “take the necessary measures.” Japan’s largest brokerage recently fired hundreds of London workers as part of a restructuring of its European equities business. It may find it harder to compete from elsewhere in Europe, according to analyst Nobuyuki Fujimoto.

“Nomura was attractive to large Japanese companies because of its ability to sell securities in Europe” from London, said Fujimoto, a senior market analyst at SBI Securities Co. in Tokyo, adding that firms such as Deutsche Bank AG, UBS Group AG and French banks “have an edge” in the EU.

Local competitor Daiwa Securities Group Inc., which has about 400 employees in London, may have to form new operations in Europe, Chief Executive Officer Takashi Hibino said on Friday. In the event of a Brexit, Daiwa would have to set up a business in the EU that replicates or replaces some functions in London due to the passporting rights issue, the company said in a memo to employees before the vote.

Shares of Daiwa closed 5.4 percent lower in Tokyo to the lowest in more than three years. HSBC’s two-day slump on an intraday basis was the largest since March 2009. London-based Standard Chartered Plc fell as much as 2.3 percent in Hong Kong before rising 0.6 percent at 2:29 p.m. local time.

Japan’s three so-called megabanks -- Mitsubishi UFJ Financial Group Inc., Sumitomo Mitsui Financial Group Inc. and Mizuho Financial Group Inc. -- also fell Monday, while smaller banks and brokerages without a significant presence in the U.K. fared better in Tokyo trading. HSBC’s Hang Seng Bank Ltd. rose as much as 0.9 percent in Hong Kong.

HSBC would probably move about 1,000 investment bankers to Paris if Britain withdraws from the EU, Gulliver said in February.

“HSBC and StanChart are the most highly exposed to the London quandary and the next subset with huge exposure would have to be Nomura and Daiwa,” said McGonegal. All four firms have benefited from linking their Asian and European businesses through London, “which is to say the least very much in doubt right now.” 

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