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HSBC investors are backing CEO George Elhedery's decision to shut parts of its investment bank in the Americas and Europe, aligning with the bank's strategic focus on Asia. Four shareholders, including two of HSBC's top 20 investors, expressed support for axing mergers and equity capital markets teams, citing stronger opportunities in Asian markets.
Once spanning over 100 countries, HSBC has spent the last decade streamlining operations. With U.S. tariffs posing risks to trade finance providers like HSBC, Elhedery faces pressure to reallocate capital to resilient Asian economies. Alex Potter of HSBC shareholder abrdn highlighted global geopolitical challenges and the limited success of foreign banks in U.S. equity investment banking.
Elhedery is expected to detail further cost-saving measures during HSBC's full-year results announcement on February 21. Media reports estimate savings between £1.2 billion and £3 billion through management cuts and further unit reductions. HSBC shares have risen 11.5% year-to-date after a 20% gain in 2024.
Sajeer Ahmed of Aegon Asset Management praised HSBC's meticulous business analysis aimed at achieving a 16% return on tangible equity (ROTE). HSBC's 19.3% ROTE in the first nine months of 2024 contrasts with its lower price-to-book ratio of 1.04 compared to Morgan Stanley's 2.16.
The restructuring aims to boost profitability and close valuation gaps with U.S. banks. HSBC's forecasted 2024 profit stands at $31.6 billion, following a 78% surge in 2023. However, internal concerns about job cuts and morale persist, particularly as Trump's deregulatory policies are expected to drive double-digit growth in investment banking. Despite challenges, HSBC's focus on Asian capital markets remains a key growth strategy.
