Analysis-HSBC's global brand in the balance as it doubles down on Asia bet

By Sinead Cruise and Lawrence White

LONDON (Reuters) - HSBC Chairman Mark Tucker leaned into the microphone at a vast conference table in Beijing, telling British business leaders and senior Chinese officials that he spoke for all UK businesses present in hoping for stronger economic ties.

Tucker, chairman of Europe's largest bank, was flanked by UK finance minister Rachel Reeves, who had invited him to lead a delegation aimed at enlisting Chinese support for Britain's growth agenda.

"It is more important than ever that we accelerate and sustain the forward momentum with a clear focus on the material and mutually beneficial agenda," he told Chinese Vice Premier He Lifeng and others at the opening of the UK-China Financial Services Summit, news footage of the event on Jan. 11 showed.

Just a few weeks later, the lender would reveal plans to wind down its mergers and acquisitions and equity capital businesses in Europe and the Americas, capitulating to Wall Street rivals who have dominated the scene in recent years. More importantly, the decision unveiled on Tuesday marked a decision to prioritise Asian corporate clients over companies in the West.

Insiders were stunned at the timing of HSBC's biggest investment banking retrenchment in decades as U.S. President Donald Trump's pro-business agenda has fuelled hopes of a dealmaking bonanza this year and beyond.

Some HSBC veterans, however, said the teams of specialist bankers advising big companies in the West on their corporate deals had rarely been profitable on their own, and HSBC Group CEO Georges Elhedery was boldly culling expensive sacred cows his predecessors had opted to keep.

"We are one of the last remaining truly global banks standing that provides its clients leading banking products and services which span transactional banking to capital markets," Michael Roberts, CEO of HSBC Bank Plc and of Corporate and Institutional Banking, said in an emailed statement.

"We are committed to serving our clients globally."

Elhedery, appointed to the top job last September, is a pragmatist who is going through HSBC's business "line by line", cutting back parts that do not pay their way or personnel who do not bring significant client relationships, said a former executive who had oversight of the equity capital markets and M&A business lines.

HSBC's European and U.S. ECM and M&A businesses collectively likely only accounted for 19% of the lender's overall investment banking revenue and just 0.3% of total group revenue, analysts at Citigroup estimated on Tuesday.

GEOPOLITICAL TENSIONS

The numbers will have caught the attention of Pam Kaur, HSBC's chief financial officer who has also been helping Elhedery identify where the bank should cut.

Still, HSBC's exit from its Western dealmaking businesses underscores how its strategic pivot to Asia is gathering momentum, and the challenge the bank faces to reconcile the planned cuts with its pitch to be a global wholesale bank.

"Our strategy supports our ambitions to be the preferred international financial partner for our clients," HSBC said in an undated summary of its strategy on its website that highlighted how its global presence facilitates cross-border trade and capital flows.

HSBC's move shows it forsaking anaemic growth in Britain and Europe in favour of Asia's more dynamic and higher potential economies, said Samuel Gregg, political economist at the American Institute for Economic Research.

Geopolitical tensions are also making it harder for the bank to straddle East and West while staying politically neutral, he said.

"The Trump Administration, while insisting that it wants to do deals with China, is going to adopt a more aggressive approach towards China. Some businesses believe that this leaves them with no choice but to pick a side," he said.

Geopolitical tensions came to a head for HSBC in May 2023 when its then-biggest shareholder Ping An Insurance of China lobbied for the bank to spin off its Asian business, a proposal ultimately defeated at HSBC's annual shareholder meeting.

The bank's move this week to further cut back its European presence would seem to vindicate Ping An's stance that HSBC's global businesses had limited synergies and that it should focus more on Asia.

Ping An did not respond to a request for comment on the eve of China's Lunar New Year holiday.

HSBC's shares barely moved in the hours after Tuesday's announcement, a sign that most investors were reserving judgment on the potential benefits or harm of Elhedery's boldest restructuring move so far. The bank has not shared details on cost savings or job cuts.

The risk for HSBC is that firing rainmakers and equity fundraising bankers in the West could prompt some of its highest-flying corporate clients to reconsider if the bank is still best placed to advise them on other business activities such as debt financing, trade or foreign exchange.

Strategically, the decision appears rational as the competitiveness of HSBC's investment bank was challenged, said one of the bank's 20 biggest shareholders.

If cost of capital is not being achieved, it is logical HSBC would retrench as other European investment banks have done in other areas, the investor said.

(Reporting by Sinead Cruise and Lawrence White; Editing by Richard Chang)