More trouble ahead for HSBC’s bluffers
CAN George Osborne ever seriously have thought HSBC would move its headquarters to Hong Kong? The Chancellor is a highly intelligent man and a gifted politician, so it seems unlikely.
The decision to stay in the UK was announced this week as if it were a marvellous coup for the Government and as if the bank were doing us all an enormous favour. Maybe this is a Machiavellian interpretation, but I wonder whether HSBC’s mooted move was all a bit of a fig leaf for easing off on the banks in general.
Osborne’s hopes of returning Lloyds fully to the private sector, followed by RBS, have been delayed by market turmoil. It may be felt that with leading lenders in a weakened state, a softer line from the Government and regulators is needed.
That may explain what otherwise seems an inexplicable readiness in Whitehall to heed to HSBC’s hollow threats. Theoretically, there were a number of other options for domicile, but none was particularly alluring.
In the US regulation is tougher than here and Hong Kong is effectively communist Beijing. The bank’s latest threat, to move 1,000 of its 5,000 London-based investment bankers to Paris in the event of a Brexit, merely calls for the world’s smallest violin.
Having dispensed with the HQ issue, the focus shifts to the profits announcement on Monday, kicking off what will be a punishing round of bank results.
HSBC is exposed to emerging markets and commodities and is likely to see hefty restructuring costs, more customer redress in the UK and will face questions over the outlook for revenues amid weak capital markets.
And it will be far from the worst Across the piece, bank profitability is being razed by low or negative interest rates. Capital buffers, as the eminent Sir John Vickers points out this week, are too low. Debt burdens are too high.
To illustrate the point, the chart above highlights debt levels in the US, the world’s biggest economy, are higher than at any point since 1790, other than during the Second World War.
Bank shares have been hammered because of fears there may be a repeat of 2008.
We are not in that territory yet, but it does not look pretty.
Shell shocked
INVESTORS in Shell took an awful lot on trust when they held their noses and supported its £36bn takeover of BG.
Shell is planning a multi-billion asset sale over the next three years to pay for the deal and to support its dividend, but it’s a terrible time to be a seller.
There are precedents for companies ploughing ahead with big deals despite carnage in the markets, such as Fred Goodwin’s takeover of ABN Amro or the abortive Prudential bid for AIA. Investors can only pray Shell chief Ben van Beurden’s big bet pays off, because the alternative does not bear contemplation.
Make or break
AS BUSINESS leaders and economists line up on either side of the Brexit debate, they ignore the reality that for ordinary voters it is not about the economics so much as emotion and identity.
The financial consequences of a split from Europe are unknowable, but there seems little reason to fear a Doomsday scenario.
John Kornblum, a former US ambassador to Germany, suggests a post-Brexit Britain could be a digital gateway to the world.
The UK is forging ahead on ‘fin tech’ – or financial technology – as with HSBC’s voice-recognition technology for phone banking and a Halifax trial of wrist bands that can authenticate wearers through their heartbeat.
It shows our future does not depend on Brussels: whether in or out, it rests on British inventiveness, intellect and enterprise.