HSBC to sell most US branches to Citizens Bank, Cathay Bank in tactical retreat from America as competition hits
- HSBC to focus on serving international companies and wealthy clients in the US as part of latest revamp
- Lender to sell much of its banking operations for the mass-market and small businesses in US to Citizens Bank, Cathay Bank
The London-based bank said it would sell its banking operations for the mass market and small businesses on the East Coast to Citizens Bank, part of Citizens Financial Group, and sell its West Coast retail operations to California’s Cathay Bank. Combined, those businesses held US$10.2 billion in deposits and US$3 billion in outstanding loans as of March 31.
“They are good businesses, but we lacked the scale to compete,” Quinn said in a statement regarding the sale. “Our continued presence in the US is key to our international network and an important contributor to our growth plans.”
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Quinn has previously argued that the US remains a necessary market for its aspirations as an international bank, but needed to be smaller and more focused.
“We remain a global international bank. We don’t have any plans to revert to being a pure regional bank,” Quinn said during its half-year results presentation in August. “There is a role for an international bank, particularly one that is capable of bridging the East and the West.”
HSBC first entered the US retail banking market when it acquired a controlling stake in Marine Midland Bank in 1980. It took full ownership of the Buffalo, NY-based lender seven years later.
HSBC’s US retail banking business struggled to be profitable in recent years as interest rates fell to historic lows, affecting the ability of banks to make money on traditional lending and other products tied to rates.
Under Quinn, HSBC has improved the profitability of its American operations. Its US Wealth and Personal Banking segment - formerly its retail and wealth management business - reported its first pre-tax profit in 14 quarters in the first quarter of this year.
But, the drag of low interest rates, combined with its small footprint, made the retail operations a less attractive business to maintain.
“The US plays a large role in HSBC’s Asia growth strategy, particularly in support of our ambitions to become the leading wealth manager in Asia,” said Greg Hingston, HSBC’s Asia Pacific regional head of wealth and personal banking. “Our refreshed strategy in the US will allow us to better serve the needs of our international wealth clients, who continue to consider the US for international education, property, investment diversification, career and family mobility and business expansion, among others.”
Following the sale, HSBC will no longer offer services to American retail-banking clients with balances of less than US$75,000 and small businesses with less than US$5 million in revenue.
It will continue to serve more affluent and wealthy international customers in the US, as well as companies with large international businesses.
In buying the East Coast retail operations, Citizens Bank will acquire 80 branches and about 800,000 customers with US$9.2 billion in deposits and US$2.2 billion in outstanding loans.
Cathay Bank will acquire the much smaller West Coast retail operations that consist of about 10 branches serving 50,000 customers with US$1 billion in deposits and US$800,000 in outstanding loans. Cathay Bank operates a sole branch in Hong Kong on the thirtieth floor of an office block overlooking Victoria Harbour. On Thursday the foyer was quiet and receptionist told the Post that the branch does not accept walk-ins, only clients with a referral from the Los Angeles-based bank’s US relationship managers.
HSBC employees hit by the restructuring will transfer to Citizens Bank or Cathay Bank, or else transition to new roles within HSBC, according to a person familiar with the British bank’s plans.
The transactions are expected to close by the first-quarter of next year and HSBC said it expects to incur US$100,000 of pre-tax costs in connection with the sales. HSBC said it does not expect to have a “significant gain or loss” on the sales.
Additional reporting by Georgina Lee