As HSBC Holdings PLC CEO Noel Quinn comes under pressure to speed up restructuring, there are growing questions about the viability of the bank's U.S. operations, according to analysts.
Quinn unveiled the bank's biggest ever restructuring program in February that includes slashing 5,000 jobs and a $100.00 billion reduction in risk-weighted assets. Quinn, whose predecessor John Flint was ousted after only 18 months in the job for failing to restructure the bank more quickly, said in April that the revamp would be partly "paused" due to the impact of the coronavirus.
But Quinn is said to be under pressure from Chairman Mark Tucker to speed up the revamp, according to the Financial Times.
Although the bank is eager to concentrate resources on regions with higher returns, such as Asia and the Middle East, its decision to endorse China's controversial new security law imposed on Hong Kong, where it makes the bulk of its profits, has led to criticism from British politicians.
Stateside operations
When Quinn announced the restructuring in February, he said he had considered selling HSBC's U.S. retail arm altogether but decided against it, since it provided liquidity for the group's wholesale and global transaction banking activities.
"That might turn out to be a rather heroic decision. Low U.S. interest rates and a weaker economy makes it a much less attractive business now," said Ian Gordon, equity analyst at Investec Securities.
"I do not think they will leave the U.S. entirely but we may see a big reduction in the retail franchise and the commercial banking franchise is less attractive now. I would certainly expect more aggressive downsizing there."
The bank's U.S. unit HSBC North America Holdings Inc.posted pretax profit of $435.0 million in 2019, versus $12.05 billion in Hong Kong, the lender's main market.
The U.S. unit reported a net interest margin of just 0.91% in the first quarter, a level lower than most other global units. But the U.S. business accounted for $133.10 billion of risk-weighted assets out of a group total of $857.10 billion as of end-2019.
"While the February plans included a one-third reduction in the size of the U.S. retail network, there are growing questions as to whether a retail presence is required at all on the East Coast, with HSBC likely able to service U.S. corporate clients from its Asian base," said Goodbody analyst John Cronin.
Along with the U.S. operations, HSBC is also assessing other parts of the group that could be disposed of or severely shrunk. HSBC has been looking at the sale of its French operations, where it has more than 290 branches, mainly in Paris and other large cities, for instance.