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A Chinese national flag flies in front of HSBC headquarters in Hong Kong. Photo: Reuters
Opinion
Editorial
by SCMP Editorial
Editorial
by SCMP 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
SCMP Editorial
SCMP Editorial
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HSBC bosses are said to have the most difficult jobs in banking. The past few months have made it even more challenging. As a British bank that makes most of its money in China and the rest of Asia, it’s caught in the middle of the escalating tit-for-tat fight between Beijing and Washington. It’s not good enough to be good bankers, they need to be politicians.
Adding to that is the Covid-19 pandemic, which has brought the local and world economies to their knees. Hong Kong’s long-suffering investors, who have been among the bank’s most devoted shareholders, are losing patience as it follows the instructions of regulators in London to suspend dividend payments at least until the end of the year.

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.

HSBC, which is already the largest foreign bank in China, wants to be the first to take advantage. It already has at least one branch in each of the nine Guangdong provincial cities of the GBA, with 17 branches in total. That puts it in a better position than most – if only it could get warring Western and Chinese politicians off its back. Good luck with that!

This article appeared in the South China Morning Post print edition as: HSBC banking on Greater Bay Area to reverse fortunes
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