HSBC Board pressures executives to deepen restructuring

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Bank reported to mull close or sale of Malta branch

The board of HSBC Holdings HSBC has decided that the bank needs to take drastic measures in order to cope with the crisis that has resulted from the coronavirus pandemic. This was reported by the Financial Times.

Hence, the company’s board is now pressurizing executives to deepen the biggest restructuring in the bank’s 155-year history. Per a person familiar with the discussions, HSBC wants a new strategic plan “sooner rather than later”.

HSBC is looking into whether it should close or sell its operations in Malta as part of an ongoing restructuring plan that will see the bulk of resources of the global bank return to its Asian roots.

Malta, together with Bermuda, the Philippines and New Zealand, form part of a long list of non-strategic countries that are being reviewed by HSBC to see if any of those divisions can be sold or closed, according to a report by the Financial Times.

Previous efforts to sell were hampered by a lack of buyers acceptable to local regulators, sources told the newspaper.

In a short company announcement on the Stock Exchange on Tuesday, the bank said: “Reference is made to reports in the local media referring to an article published by an international news agency speculating on the HSBC Group’s future global strategy. The bank informs the market that the HSBC Bank Malta plc Board has no information that requires a further company announcement. As has been the case in the past, the bank’s media policy is not to comment on speculative stories.”

Earlier in February, the bank had announced plans of slashing 35,000 jobs, reducing $4.5 billion in expenses and $100 billion of risk-weighted assets by radically shrinking its businesses in the United States as well as Europe. Notably, the bank is planning to redirect resources and invest in growth areas like Asia, from where almost 50% of its revenues come.

The company put a pause on job cuts due to the already worsening conditions that resulted from the pandemic. However, now, HSBC’s board is urging executives to initiate more radical changes, which may include further lay-offs or even a possible sale of its US business along with its retail network in France and operations in smaller non-strategic countries.

In the United States, the company has a small retail network alongside trading and transaction banking operations. While HSBC did shrink its US operations by almost a third in February, management is now contemplating whether the business is viable at all.

A person familiar with the matter said, a US sale “is possible, but it’s very early in terms of making that decision. What HSBC needs to understand is, for better or worse, their opportunity is in China.”

Another person said, “We have to have a business there [the US], there’s no question of that, but the shape we’ve got to look at again.”

Notably, at the time of announcing the first-quarter 2020 results, the company had projected higher expected credit losses during the year as a result of the virus-induced crisis. Also, it expects lower customer activity levels and reduced global interest rates to put pressure on revenues.

Shares of HSBC have lost 41.3% so far this year compared with a 42.1% decline recorded by the industry.