HSBC Holdings PLC CEO Noel Quinn promised to "move the heart of the business to Asia" as he outlined the bank's plans to shift resources from west to east when unveiling full-year results.
Quinn said the bank's restructuring would see it concentrate its efforts in three areas: Asia, wealth management and fee income operations.
He said HSBC aimed to move 8 percentage points of group tangible equity to Asia over the medium to long term. For the first time, this target is explicitly linked to senior executive compensation for both Quinn and CFO Ewen Stevenson.
The bank expects to move around 10 percentage points of tangible equity to wealth and personal banking over the same period, with a broadly equivalent reduction in HSBC's global banking and markets arm.
"It's coming from the west principally out of global banking and markets in the U.S. and continental Europe which are low-return markets for us relative to the return opportunity in Asia. So we're in the process of running down part of our book in the U.S. and Europe and reinvesting those saved risk-weighted assets into Asia," said Quinn.
RWA reduction
HSBC reduced risk-weighted assets by $51.5 billion in 2020, with a target of a $100 billion reduction by 2022.
Asia contributed 71% of global growth in 2019 and is expected to account for almost half of global GDP by 2025, said HSBC's Asia chief, Peter Wong. By 2030, two-thirds of the world's middle class will be in Asia, he said, up from just over 50% today. Trade is expected to grow 25% faster than the rest of the world over the next five years, too.
Wong said HSBC is already a leader in Asia, operating in 19 markets across the region that cover 98% of the population.
"Our international competitors lack our footprint and deep connection to Asia and our Asia competitors lack our international network," he said.
Hong Kong, mainland China, Southeast Asia and India will be the key drivers of the bank's growth within Asia, said Wong. These markets will benefit from an expected doubling of assets under management in Asia to $30 trillion over the next five years.
HSBC aims to hire more than 3,000 wealth managers in China as it expects the current middle-class population to double to 600 million by 2028.
In Singapore, the bank saw double-digit growth in assets under management in 2020 across its premier Premium and Jade wealth personal banking customers.
"We will invest an additional $6 billion in the region over the next five years with half of it in south and Southeast Asia," Wong said.
Double-digit growth target
The aim is to generate double-digit profit-before-tax growth in Asia over the medium to long term.
HSBC's CEO of wealth and personal banking, Nuno Matos, said Asia is the fastest-growing region for wealth assets. HSBC has $1.6 trillion of wealth balances, with Asia accounting for more than 65% of its wealth revenues. In 2020, HSBC's global wealth balances grew by more than $160 billion.
"Over the next three to five years we will invest more than $3.5 billion to leverage these advantages and accelerate development of our wealth businesses, particularly in Asia," said Matos.
HSBC's shares in London were down 1.78% to 423.9 pence per share in mid-morning trading.