HSBC says SEC is prob­ing its Asia hires

The Pak Banker - - COMPANIES/BOSS -

HSBC said it was be­ing in­ves­ti­gated by the Se­cu­ri­ties and Ex­change Com­mis­sion in re­la­tion to hir­ing prac­tices of can­di­dates with ties to govern­ment of­fi­cials in Asia. In a foot­note to its earn­ings state­ment, the bank said it had re­ceived var­i­ous re­quests for in­for­ma­tion from the SEC, which was also tar­get­ing other fi­nan­cial in­sti­tu­tions as part of the same probe.

"HSBC has re­ceived var­i­ous re­quests for in­for­ma­tion and is co­op­er­at­ing with the U.S. Se­cu­ri­ties and Ex­change Com­mis­sion (SEC) in­ves­ti­ga­tion. It would be in­ap­pro­pri­ate to com­ment fur­ther," HSBC spokesper­son Gareth Hewett told Reuters.

The SEC opened in 2013 a probe into JPMor­gan re­gard­ing the hir­ing of 'princelings', the term used in Asia to re­fer to the chil­dren or younger rel­a­tives of China's political lead­ers or of pow­er­ful ex­ec­u­tives at state-owned en­ter­prises. JPMor­gan may hold steady on cost tar­get de­spite low in­ter­est rates At JPMor­gan Chase & Co's an­nual in­vestor day on Tues­day, one big ques­tion will be at the top of at­ten­dees' minds: How can the bank keep a tight lid on costs with­out hurt­ing its abil­ity to grow rev­enue?

JPMor­gan's chief ex­ec­u­tive, Jamie Di­mon, and at least five of his top ex­ecu- tives are ex­pected to give pre­sen­ta­tions on the bank's di­verse range of busi­nesses at the day-long event, with fore­casts on rev­enue, ex­penses and share­holder re­turns. They're also ex­pected to of­fer some fresh de­tails on how the bank is us­ing tech­nol­ogy to im­prove op­er­a­tions and slash costs - an ini­tia­tive Di­mon and his deputies have long been tout­ing.

But for the first time in years, JPMor­gan is not ex­pected to ex­pand fur­ther its cost-cut­ting tar­gets. The bank is only half­way through a pre­vi­ously an­nounced $4.8 bil­lion cost-cut­ting tar­get, and cut­ting any deeper could hurt its busi­nesses, an­a­lysts said. JPMor­gan has al­ready cut more than 25,000 jobs since 2011. That would run counter to what other big banks have been do­ing. Ex­ec­u­tives from banks in­clud­ing Mor­gan Stan­ley (MS.N), Gold­man Sachs Group Inc (GS.N), Bank of Amer­ica Corp (BAC.N) and U.S. Ban­corp (USB.N) have all re­cently talked about fur­ther cost­cut­ting ef­forts. Be­cause of that, and the trou­bles at Euro­pean ri­vals, top brass at JPMor­gan have an in­cen­tive to rein­vest in key busi­nesses to take mar­ket share from com­peti­tors who are pulling back.

"This is the sort of en­vi­ron­ment that Jamie Di­mon and JPMor­gan live for: slug­gish­ness in the en­vi­ron­ment, com­peti­tors feel­ing pain," said Mike Mayo, a bank stock an­a­lyst with CLSA. Even so, an­a­lysts said they and their in­vestor clients will want more in­sight into how JPMor­gan strikes the fine bal­ance be­tween cut­ting costs to pro­tect prof­its, and spend­ing money for growth at a time when in­ter­est rates re­main stub­bornly low and the econ­omy shows signs of be­com­ing slug­gish. Some an­a­lysts and in­vestors worry that JPMor­gan may have to lower its profit tar­get again.

The bank's pub­licly stated goal go­ing into in­vestor day is to achieve a 15 per­cent re­turn on tan­gi­ble com­mon share­holder cap­i­tal over the long term. That is down from a 16 per­cent tar­get in 2013, which JPMor­gan low­ered to a range of 15-to-16 per­cent in 2014. JPMor­gan de­liv­ered re­turns of 13 per­cent in both 2014 and 2015.

"What is that go­ing to be and how can they get there with­out higher in­ter­est rates?" said Chris Mu­tas­cio, an an­a­lyst with Keefe, Bruyette & Woods. He should have an an­swer at 6:45 a.m. on Tues­day, when JPMor­gan is ex­pected to post a slid­edeck on its web­site ahead of the event.

Last year, ex­ec­u­tives showed a slide in which higher rates would con­trib­ute about half of the ad­di­tional prof­its needed to reach the 15 per­cent tar­get. But, with the ex­cep­tion of the small boost to rates from the Fed­eral Re­serve in De­cem­ber, that tail­wind has not ap­peared.

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