HSBC reviews retail banking outside UK and Hong Kong

Unlock the Editor’s Digest for free

Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

HSBC is reviewing its retail banking operations outside the UK and Hong Kong, a move that could see it substantially scale back operations in countries including Mexico, as it seeks further cost cuts.

The bank is looking at locations outside its core markets where it can reduce its consumer presence and focus on wealthier “premier” clients, according to people familiar with the discussions.

One of the markets under review is Mexico, a country which HSBC entered more than two decades ago but where it has a fraught history, including being fined more than $2bn by US authorities in 2012 for failures that allowed drug cartels to launder hundreds of millions of dollars.

Douglas Flint, HSBC chair at the time, said the bank had been
“humbled” and that the board took full responsibility for the failures.

Since then HSBC – which came to the country via its acquisition of Grupo Financiero Bital in 2002 – has grown its Mexico deposits to almost $30bn, making it the bank’s ninth largest market with operating costs of $1.8bn.

“It comes down to the scale of the consumer business in Mexico,” said one of the people familiar with the review. “You try to thin the ranks of your retail business and focus on the premier client who also has a wallet in wealth. In Mexico, HSBC doesn’t have a competitive scale.”

No decision has been made but a pullback would be the latest sign of retrenchment from a bank that went on a global expansion spree in the early 2000s before refocusing on its core businesses in Hong Kong and the UK as well its wealth offering.

HSBC sold its Canadian business to Royal Bank of Canada for $10bn two years ago, with similar exits from lossmaking consumer operations in France and the US.

The bank is not considering pulling out of Mexico entirely, but it will look at significantly cutting its retail presence where it has struggled to compete with larger rivals such as BBVA and Citigroup’s Banamex.

HSBC is also reviewing its position in countries such as Malaysia and Indonesia where executives think it would also better benefit from focusing on premier banking rather than mass-market customers.   

HSBC’s new chief executive Georges Elhedery, who took the helm in September, is keen to focus on clients in the bank’s “premier” category as well as in wealth management as he seeks to streamline the bank’s operations and shrink costs, one of the people said.

Senior executives at the bank are working towards a goal of as much as $500mn in annual savings from job cuts already announced, according to two people with knowledge of the matter, who cautioned that the number could change.

Recent departures include Nuno Matos, who ran HSBC’s wealth and personal banking business, Annabel Spring, the bank’s global private banking and wealth head, and Céline Herweijer, the group sustainability officer.

Elhedery has also consolidated overlapping senior roles in commercial banking and the global banking and markets unit, as part of a wide-ranging overhaul of the bank’s operations.

He is also abolishing the “general manager” title, a designation that gives a higher status to some of the bank’s most senior executives and brings better perks.

HSBC’s main international rival Citigroup is in the process of exiting its Mexican consumer business as it also retrenches from an earlier age of global expansion.

HSBC declined to comment.