HSBC bets on Canada in bid for market share
Mortgage offer undercuts big domestic lenders
• HSBC Holdings Plc is getting aggressive in Canada — and one needs to look no further than its l atest mortgage rate f or proof of broader ambitions.
HSBC Canada is offering five- year fixed- term mortgages at 2.39 per cent, undercutting the lowest discretionary rates at the largest domestic lenders, including Toronto-Dominion Bank and Royal Bank of Canada.
“I want to be more competitive,” Sandra Stuart, chief executive officer of the Canadian unit of Londonbased HSBC, said in an interview from her Vancouver office. “I will never be as big as the Big Five, but I certainly want to have our share of market, and I want to be out there with good competitive products.”
The mortgage push is part of Stuart’s strategy to expand HSBC Canada across its main businesses of commercial l ending, capital markets, retail banking and wealth management. Stuart, who became head of the Canadian operations in June 2015, won the backing of HSBC, which she said has made a fourfold increase in annual investment in the Canadian operations to gain market share.
“HSBC globally is making a big bet on Canada, and they’re investing in us to do that,” Stuart said. “There’s a handful of priority markets that are going to get continued investment and our job is to develop the strategy, to execute and of course deliver the returns.”
Shares of HSBC have climbed 1.5 per cent this year in London trading, trailing the 4.5 per cent advance of the 12- company FTSE All Share Banks Index.
HSBC has been in Canada since 1981, expanding through takeovers of domestic lenders and the Canadian operations of foreign banks t o become t he seventhlargest lender in the nation with $ 95.7 billion in assets. Commercial banking accounts for 60 per cent of the firm’s Canadian profit, while its global banking and markets operations contribute 30 per cent and retail banking and wealth management represent 10 per cent.
CANADA GROWTH
“Canada is a great place to do business,” Stuart said, citing the nation’s growing economy, geographic stability and international trade ties that dovetail with HSBC’s global reach. “Canada is the No. 2 export partner for the U.S. and we’ve got the gateway to the Pacific, and we’ve got a real focus now on China, a great corridor with Hong Kong. We’re really well positioned.”
The Canadian operations are a “Top Five” producer of profit before taxes, contributing 7.6 per cent of total earnings for Europe’s biggest bank last year, up from 4.4 per cent in 2015. HSBC Canada had profit before tax of $715 million last year and revenue of $2 billion.
HSBC Canada is revamping its operations, spending more to update technology and rolling out new offerings for customers. Stuart, 53, added 60 commercial bankers in the past year and aims to hire up to 40 more by year end to the division’s 1,000-strong workforce. In investment banking she’s added a dozen professionals in the past 12 months to lift staffing levels to about 180 people. She has repositioned the firm’s retail and wealth offerings to draw a broader clientele.
“We’re an international bank in the country and we have to compete on that basis, but we have to be good competition for any bank in the country, whether it’s the Big Five or a small regional player here in the west,” Stuart said.
On retail banking and wealth, which has about 2,400 employees, HSBC has made some key changes. Last October, the l ender recruited Larry Tomei, a 22- year veteran from Canadian Imperial Bank of Commerce, to head up the business. The bank, which previously targeted a more affluent clientele f or i ts mortgages, has “broadened its strategy” to woo a wider range of customers, leading with that mortgage offering, according to Stuart.
“HSBC has had marketbeating rates for over a year now,” said Rob McLister, founder of the mort - gage comparison website Rate Spy. com. “HSBC is on a market share binge.”
HSBC is looking to tap into new customers by opening more branches in cities including Vancouver, Montreal and Toronto, adding to its network of 129 locations.
“They won’t be the big heavy branches with a vault,” she said. “There’ll be a couple of ATMs, a place to get cash, someone to help you get a mortgage, there’ll be Wi- Fi, computer terminals and it’ ll be more digital.”
She’s even open to the idea of acquisitions.
“There’s not too much out there to buy, but if a portfolio became available or something made sense for us, we’d absolutely take a look at it,” Stuart said.
That doesn’ t i nclude Home Capital Group Inc., the struggling mortgage lender facing a run on deposits.
“This isn’t something for us right now,” she said.