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Don Weinland

HSBC Holdings executives think investors do not get their restructuring plan - and they might be on to something.
Chief executive Stuart Gulliver has said the bank's four-year-and-running attempt to streamline profitability across businesses - while bringing costs to heel - is working. It is just hard to see, if not in the thick of it.
"[It's a] radical reorganisation that hasn't been well understood outside the organisation," Gulliver said when releasing HSBC's annual results a week ago.
He even went on to say management deserved more recognition for the remoulding effort that had led to the disposal of 77 businesses, 50,000 staff members and, in its embattled Swiss private bank, 70 per cent of its clientele.
"We haven't been given any credit for the restructuring," Gulliver said.
Some credit is due - at least for convincing bankers to share clients with one another, a major facet of the reorganisation that the bank calls "collaboration".
For global private banking, one of four overarching global businesses, new money generated from client referrals grew to US$10 billion last year, more than double the year before, the bank said in its latest annual report.
Collaboration in HSBC's global asset management business brought in US$29 billion last year in net new money, mainly in fixed-income and liquidity products.
[It's a] radical reorganisation that hasn't been well understood outside the organisation
Stuart Gulliver, HSBC chief executive
Client sharing between commercial banking and global banking and markets helped push primary market transactions to 157 from 122 the year before.
That collaboration grew revenue for the global banking business by 19 per cent.
It was also reflected in its debt capital markets business in Asia-Pacific. HSBC underwrote US$44 billion in deals last year, up 38 per cent from the year before, according to data from Dealogic. Over the same period, total proceeds from transactions in the market grew 30 per cent.
The bank held third place in bookrunning in the region last year, behind two mainland financial institutions.
In a note, Fitch Ratings said HSBC "showed that its ability to generate recurring revenues across regions and products remains strong".
The strategy is not unique; nor is it easy to put into place. Rival Standard Chartered has attempted to do much the same. Everything down to getting managers to hand clients over to other bank businesses can stifle growth.
When Gulliver took over in 2011, he found himself at the head of several different banks operating over a smattering of diverse markets.
The concept behind collaboration was to bring the fragmented banks together across markets and borders into a position where clients could be passed between businesses and banked for every dollar, yuan, rouble or rupee that they had.
Gulliver said last week that the bank used to resemble a "federal structure" and his efforts had centralised it.
None of this means the bank is more profitable today than it was a year ago. HSBC publishes only revenue figures that show collaboration in action, not profits. Pre-tax profit was still down 17 per cent in 2014 year on year.
Restructuring is also just part of the reorganisation effort - perhaps, now, second to controlling costs.
The bank's performance in managing the new costs of regulation, and its lack of prescience in accounting for future costs of known tax evasion infringements, has been disappointing. Costs jumped about 6 per cent last year. Efficiency has plummeted.
"It's still difficult to judge profitability from collaboration from what we can see," said Sabine Bauer, a senior director at Fitch in Hong Kong.


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HSBC

How sharing helped HSBC generate revenue in 2014

Stuart Gulliver says HSBC management deserves more recognition for the remoulding effort that has led to the disposal of 77 businesses, 50,000 staff members and, in its embattled Swiss private bank, 70 per cent of its clientele. Photo: Reuters

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