Editorial | HSBC banking on Greater Bay Area to reverse fortunes
- Company under fire from investors and politicians looks to Wealth Management Connect scheme with region to help boost its coffers by US$185 billion over next five years
Earlier this month, the bank warned it could take provisions of up to US$13 billion for expected credit losses this year, mostly due to the economic fallout from the coronavirus pandemic. Pre-tax profit was US$1.09 billion, well below a consensus estimate of US$2.46 billion and about a sixth of the US$6.19 billion it reported a year ago.
Yet, for all the challenges, HSBC is right to bank on China, no pun intended. Since its on-again, off-again job cuts and restructuring programme four months ago, it has kept its cards close to its chest as to how it plans to redeploy resources and reduce headcounts. Now, though, there is finally some clarity. It has just announced it will hire up to 3,000 wealth management experts on the mainland.
This is to take advantage of the so-called Wealth Management Connect announced by Beijing in June. Coming on the heels of the Connect schemes for stocks and bonds, it promises to be a game changer in the Greater Bay Area (GBA), an economic region of 70 million people around Hong Kong. According to an HSBC estimate, banking revenue from the region alone could top US$185 billion over the next five years.
Under the new Connect scheme, GBA residents on the mainland may, for the first time, invest in Hong Kong without setting foot in the city through a bank that has a cross-border branch network or partnerships. Similarly, the cross-border arrangement allows them to open an account in Hong Kong from their home base. The schemes together amount to an epochal change, a loosening of China’s capital accounts, at least within the confines of the GBA.