HSBC mulling significant restructuring, including sale or closure of Malta operations – FT
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Updated with HSBC Bank Malta PLC Company Announcement
International lender HSBC is looking at all possible options as it draws up the bank’s biggest restructuring process in its history. Before the COVID-19 pandemic changed reality as we know it, the Bank had already planned to shed of 35,000 jobs around the world in a bid to save more than 4.5 billion dollars in costs. This would have been achieved by significantly shrinking its operations on the European continent and partly the US. The plan at that point had been to focus its key operations in Asia, its historical centre and the region which brings the largest chunk of profits.
When the coronavirus pandemic brought the world at a halt, the Bank’s immediate reaction was to postpone these decisions, at first expressing concern for its employees. However, as the crisis lengthened, the company’s board not only pushed for a resumption of such plans, but actually for deeper and wider cuts, in view that an internal report had shown that the pandemic would lump on the Bank no less than 11 billion dollars in bad loans, that is credit that is being re-paid by companies or people who are unlikely to meet their commitments with the credit institution.
US operations most likely to go
Among the radical decisions being considered by the 155-year old Bank in its efforts to move towards leaner operations, there is a mixture of large-scale divestments, such as the possibility of selling the US business or its retail network in France, but also the re-examination of marginal businesses. Industry experts, who spoke with the Financial Times this week said that a final decision may take a few more months, the new plan will be announced sooner rather than later.
The US operations appear to have a big red circle round them after profits there went down by 39% last year while the significant equity operations yielded a marginal 1.5%. Inevitably, comparisons are made with the Bank’s performance in Asia and the Middle East, were the Bank registered a return of 15.8% and 12% respectively. Key analysts at the Bank see China offering significant opportunities for increased profitability and the Board is therefore pushing for the allocation of more resources to that particular stage.
Smaller operations could be closed or sold off
Besides these large scale divestments, the Financial Times also reports that HSBC executives are also revisiting a list of operations in countries which are considered as non-strategic, including Malta, Bermuda, the Philippines and New Zealand with a consideration of sale or even closure. It is understood that in some of these countries, efforts to sell have already been made, buy potential buyers were unacceptable to local regulators.
HSBC’s shares are currently at their lowest levels in a decade, and the bank was forced to cancel its dividend for the first time in 74 years this year.
In a company announcement on the stock exchange, HSBC Bank Malta PLC said “Reference is made to reports in the local media referring to an article published by an international news agency speculating on the HSBC Group’s future global strategy. The bank informs the market that the HSBC Bank Malta p.l.c. Board has no information that requires a further company announcement. As has been the case in the past, the bank’s media policy is not to comment on speculative stories.”
