HSBC is planning to shut down some of its investment banking operations in the UK, Europe and the Americas to focus on its core markets in Asia and the Middle East, a leaked memo to staff has revealed.
The bank is expected to wind down its mergers and acquisitions (M&A) advisory and equity capital markets businesses in these regions in the coming months.
The internal memo, seen by Bloomberg News, confirmed that HSBC will no longer provide equity underwriting and advisory services outside of its core operations in Asia and the Middle East.
“We will retain more focused M&A and equity capital markets capabilities in Asia and the Middle East, and we will look to wind-down those activities in Europe, the UK and the Americas,” the memo said, with Michael Roberts, CEO of HSBC Bank, adding that the Bank intends to "move to a more competitive, scalable, financing-led model".
A spokesperson for HSBC later confirmed the contents of the memo.
Last week, Banco Santander was reported to be reconsidering its presence in Britain, two decades after entering the market with its acquisition of Abbey National.
A source said Santander's review was part of a regular assessment of its major businesses which could result in a variety of outcomes in the UK, including scaling back its business in the UK or exiting the market altogether to focus on bigger growth regions such as the United States.
However, the report stressed that "no deal or announcement was imminent and that the review was at an early stage".
A former executive at Santander reportedly said that it had “always been a possibility” that Ana Botín, executive chair of Santander, would decide to sell the ringfenced bank.
However, Botín later dispelled the reports while speaking at the World Economic Forum. She said: "We love the UK. It's a core market and will remain a core market for Santander. The UK has a huge opportunity because it can move faster. The UK does not have to agree with 27 countries now.
She added that "the army of investment bankers that want to get fees... start looking at M&A, they start looking around. It's definitely not coming from us".
Commenting on the HSBC memo, Alex Marshall, managing partner at, CIL, said: “I don't think this is about having to make a difficult choice between serving China versus serving the West - I think it's about cold hard commercial facts.
“HSBC has a commanding position in MENA equity capital markets, whereas it has struggled to achieve equivalent status in the US in particular. The bank's ranking in M&A advisory work has been declining over the long term. It's a fiercely competitive market, and with deal volumes in Europe having been depressed in recent years, maybe it is no longer worth prioritising this region.
“The reality of capital flows is another telling piece of information: Asian capital is a significant growth story, and HSBC has been well placed to participate in this boom. Belt & Road has seen huge investment designed to connect Asia with developing and emerging economies, particularly across Asia, the Middle East and Africa. This is a huge prize, and HSBC has done well out of it. Europe's share of global capital flows, by contrast, is pretty limp.
“I think HSBC's move reflects a realistic and pragmatic doubling-down of their bet on Asia and MENA capital flows. They aren't really abandoning a position of great strength in Europe and the US by contrast to their dominance in other markets.”
