HSBC, Europe’s largest lender, has revealed its intention to exit major segments of its investment banking business in the UK, Europe, and the Americas. The decision comes as part of a sweeping overhaul led by chief executive Georges Elhedery, aimed at streamlining the bank’s operations and sharpening its focus on core strengths.
The bank plans to shut down its mergers and acquisitions (M&A) advisory and equity capital markets units outside of Asia and the Middle East. A source familiar with the matter explained that these segments lacked the scale necessary to compete effectively in the highly competitive markets of the West. Continuing to invest resources in these units would not yield significant returns, the source added.
While HSBC will wind down these operations, it will retain its debt capital markets, leveraged finance, real asset finance, and infrastructure finance businesses in the affected regions, as they have proven to be more scalable and profitable.
The move highlights the relatively small role investment banking plays in HSBC’s global operations. According to the bank’s interim report, investment banking accounted for just 6% of its total revenues in the first half of last year, with revenues from the segment down 3% year-on-year.
In a statement, HSBC said the closures are part of its “ongoing efforts to simplify HSBC and increase leadership in our areas of strength.” It emphasized a more focused approach to M&A and equity capital markets in Asia and the Middle East while noting that the exit from these businesses in other regions is subject to local legal requirements.
This restructuring is one of many changes spearheaded by Elhedery, who succeeded Noel Quinn as CEO last year. The new strategy involves splitting the bank into “eastern” and “western” divisions and merging its commercial bank with the global banking and markets division. The overhaul also includes cost-cutting measures, such as reducing layers of senior staff.
HSBC’s restructuring comes at a time when the bank is preparing for potential challenges, including the impact of falling interest rates on profits. Additionally, the company is seeking a new chair as Mark Tucker’s term nears its end.
This decision follows another recent move by HSBC, which shut down its payments app, Zing, after just a year of operation. The app was launched as a direct competitor to digital fintech services but failed to meet expectations.
