The new chief executive of HSBC has promised to break almost a decade of declining revenues by investing $15 billion (€12.7 billion) to $17 billion in "growth and technology" as he presented his strategy to investors.
John Flint, who was promoted chief of Europe's biggest bank in February, reassured shareholders on Monday that he would maintain the dividend at current levels and continue the group's recent practice of buying back shares.
“After a period of restructuring, it is now time for HSBC to get back into growth mode,” said Mr Flint, a 28-year veteran of the bank.
“In the next phase of our strategy we will accelerate growth in areas of strength, in particular in Asia and from our international network.”
Plan
Much of the eight-point strategic plan presented by Mr Flint represents continuity from the “pivot to Asia” strategy of his predecessor, Stuart Gulliver, including plans to expand in Hong Kong and the Pearl River Delta region of southern China by redeploying capital from less profitable parts of the group.
Along with Mark Tucker, who became the bank’s first external chairman when he was hired from Asian insurer AIA last year, Mr Flint hopes to put the bank back on the front foot after a long period of restructuring and criticism that it was “too big to manage” after big fines by regulators for various misconduct issues.
The HSBC chief said the bank would seek to expand its insurance and wealth management operations in Asia, while looking for opportunities to capitalise on opportunities from China’s Belt and Road Initiative and the growth of green finance.
“We are going to build a leading wealth management business to capture the growing wealth in Asia,” said Mr Flint.
“The Asian middle class base and average household income are expected to more than double by 2030, but Asian high net worth financial income will double before that – by 2025.”
Investors were underwhelmed, however, and HSBC shares gave up early gains to trade 5.5p lower at 724.4p.
Joseph Dickerson, banks analyst at Jefferies, said: “Investors may question the acceleration of growth in HSBC’s Asian business at this point in the cycle, though the strategy plays to HSBC’s strengths and positioning for Belt & Road opportunities.
Other priorities are to turn round the bank’s poor performances in the US and France and to continue expanding its market share in UK mortgages, Mr Flint said.
Options
He said HSBC had examined all options in the US, but it decided that exiting its retail banking operation would not solve its problem. Instead, the bank would increase unsecured consumer lending and seek to add more internationally focused US customers. “We think the right answer is to grow all segments including retail [in the US],” he said.
Iain Mackay, finance director, said two-thirds of the $15 billion–$17 billion investment plan would be focused on technology, digitisation and process improvement and the remainder on improving its compliance, anti-money laundering and cyber security systems.
Big banks are stepping up their investments in technology in response to the digital disruption sweeping the industry, particularly as big tech groups such as Amazon, Facebook, Alibaba and Tencent encroach on the financial services sector.
Overall, Mr Flint said the bank’s return on tangible equity would be greater than 11 per cent by 2020, targeting mid-single digit growth in annual revenue and low to mid-single digit growth in operating expenses. It will maintain its common equity tier one ratio above 14 per cent.
– Copyright The Financial Times Limited 2018
