HSBC ex­ec­u­tives rue missed chance in HQ choice

The Pak Banker - - FRONT PAGE -

Bri­tish Fi­nance Min­is­ter Ge­orge Os­borne's re­lief at HSBC's choice of Lon­don over Hong Kong as its head­quar­ters is not shared by sev­eral top ex­ec­u­tives who rue a missed op­por­tu­nity for its China-cen­tered growth strat­egy. With its his­tor­i­cal roots in China -- HSBC was founded in Hong Kong and Shang­hai in 1865 -Europe's big­gest len­der has stepped up ef­forts in re­cent months to be­come chief cheer­leader for Bei­jing's 'one belt, one road' in­fra­struc­ture plan.

"A move to Hong Kong would have sent very pos­i­tive sig­nals to the re­gion in the longer term," one se­nior Hong Kong-based ex­ec­u­tive told Reuters, speak­ing on con­di­tion of anonymity due to the sen­si­tiv­ity of the is­sue within the bank.

HSBC had a taste of what China's out­bound in­vest­ment drive can of­fer ear­lier this month as sole in­ter­na­tional ad­viser to state-owned China Na­tional Chem­i­cal Corp on its $43 bil­lion bid for seeds and fer­til­izer gi­ant Syn­genta, the big­gest ever over­seas takeover of­fer by a Chi­nese com­pany.

China's plan for a new silk road and eco­nomic belt, which Bei­jing en­vis­ages spread­ing from Western China to Cen­tral Asia and on­wards to Europe, has echoes of The Hongkong and Shang­hai Bank­ing Cor­po­ra­tion's orig­i­nal 19th cen­tury vi­sion, when Thomas Suther­land founded the bank to meet the de­mands of China's grow­ing busi­ness com­mu­ni­ties and their need for more re­li­able and so­phis­ti­cated bank­ing.

Fast for­ward 150 years and some mem­bers of HSBC's man­age­ment feel a move back to its orig­i­nal home­town of Hong Kong would have helped the bank win more ad­vi­sory busi­ness, along with the fi­nanc­ing for some of the huge in­fra­struc­ture projects ex­pected on China's new silk road.

HSBC's his­tory tells how Suther­land weath­ered a fi­nan­cial storm in Hong Kong in 1866 by main­tain­ing the bank's pay­ment pe­riod for bills of ex­change when oth­ers were cut­ting theirs, a move which kept him in busi­ness as other banks col­lapsed.

Af­ter Sun­day's his­toric board meet­ing in Lon­don, HSBC said that Asia re­mained at the heart of the group's strat­egy, a line a spokes­woman for HSBC re­it­er­ated when asked about any divi­sions within the bank's se­nior ech­e­lons.

HSBC in­sid­ers told Reuters the bank had taken into ac­count Chi­nese sen­si­tiv­i­ties in tim­ing the an­nounce­ment of its de­ci­sion to re­main in the UK, wait­ing un­til the end of the lu­nar new year hol­i­day.

"There are se­nior ex­ec­u­tives in Asia who were very ex­cited about the pos­si­ble move...I ex­pect the bank will now do a lot of PR to re­in­force the 'we love you mes­sages' to China, hav­ing turned them down," an ex­ter­nal source fa­mil­iar with the board and man­age­ment team's think­ing told Reuters.

In con­ver­sa­tions both be­fore and af­ter the de­ci­sion Reuters spoke with nearly a dozen Asia-based ex­ec­u­tives at the bank who said they would wel­come the head­quar­ters mov­ing east­wards.

HSBC set out a strat­egy last year to shift up to $230 bil­lion of as­sets saved by spend­ing cuts else­where to Asia, so that it could in­vest more in the Pearl River Delta and South­east Asia in par­tic­u­lar. That gave a longterm logic for a move to Hong Kong, de­spite near-term head­winds such as flag­ging Chi­nese eco­nomic growth and gy­ra­tions in the coun­try's stock mar­kets.

But a move by Bri­tain's Os­borne to scrap most of an oner­ous levy on banks' global bal­ance sheets re­moved one of the big­gest dis­ad­van­tages of hav­ing a Lon­don base, ap­peas­ing many in­vestors who had pushed for the HQ re­view.

The make-up of HSBC's board also likely played a part in the out­come, said Chris White, head of eq­ui­ties at Premier As­set Man­age­ment, which holds shares in the bank. "If you look at the com­po­si­tion of HSBC's board, it's mainly Euro­pean, so it shouldn't nec­es­sar­ily be any sur­prise when they de­cide that they ought to stay in Europe," he said.

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