HSBC Said to Seek Wealth Management Asset Acquisitions This Yearby
Bank said to plan buying 3 to 4 portfolios and platforms
HSBC joins global trend as capital rules hit balance sheets
HSBC Holdings Plc is planning to pursue deals to expand in asset and wealth management as the lender seeks to capitalize on the growing funds of the middle class in Asia and diversify its business away from traditional lending, according to two people with knowledge of the plans.
Europe’s largest bank aims to make three or four acquisitions globally this year, with a particular focus on China, said the people, who asked not to be identified because the strategy isn’t public. The targets would be portfolios of assets or platforms allowing the bank to offer a wider range of products, rather than sizeable asset-management companies, the people said.
A bank spokesman declined to comment on HSBC’s strategy in the sector.
International banks have been growing their wealth and asset management arms as balance-sheet lending and securities trading become less profitable under new capital rules. Led by Mary Callahan Erdoes, JPMorgan Chase & Co.’s asset-management unit has grown to oversee about $1.7 trillion globally and set up a money manager in Shanghai last year. Swiss lenders UBS Group AG and Credit Suisse Group AG are pulling back from investment banking in Europe and shifting resources to the higher potential returns in Asian wealth management.
Chief Executive Officer Stuart Gulliver has been under pressure to streamline HSBC, the biggest provider of trade finance in the world, after profitability declined and the share price flagged. The lender is in the middle of a program started in June 2015 to redeploy as much as $150 billion of assets to Asia and hire 4,000 people in the Pearl River Delta region around Hong Kong, where Gulliver pledged to “capture growth opportunities” in asset management.
Wealth products, including asset management, accounted for 10 percent of HSBC’s total revenue in the first nine months of 2016. Revenue from that business dropped 13 percent from a year earlier to $3.9 billion, including $718 million from asset management. The bank is set to report full-year results later this month.
Growth in the business may be a boon to retail banking and wealth management chief John Flint, seen as a candidate to succeed to Gulliver, who may step down in the next few years. Flint told investors in a presentation in October that the asset management business would shift its focus to Asia and that the unit had the “potential for selective acquisitions to strengthen franchise.”
The bank said it increased assets under management in Asia by 15 percent to $145 billion at the end of September, making up more than one-third of the $416 billion total the unit oversees. That put it on track to meet its goal of boosting Asian assets under management by 10 percent a year through 2017 as part of Gulliver’s broader plan for the bank.