HSBC’s CEO has his eye on China wealth beyond Xi’s crackdown

HSBC Holdings Plc Chief Executive Officer Noel Quinn is betting on China’s middle classes. It’s an opportunity too big to miss, he believes, even as President Xi Jinping cracks down on the country’s wealthiest.

“Don’t just think about wealth in China as the super rich, it’s also wealth for everybody,” Quinn said in a Bloomberg “Front Row” interview on Sept. 1.

The CEO hasn’t been to China since the pandemic hit and he’s yearning to get back. For the Birmingham-bred Quinn, who spent several years in Hong Kong as a commercial banker, making China once again the focal point will be key for his plans to turn the 156-year-old lender around.

“I’d love to go to China, but at the moment, it’s not possible to move” into the country from the U.K., Quinn said.  “But I’ve had regular dialogue with China, our customers there, and stakeholders.”

They’ve got plenty to talk about. As part of the latest push into Asia, the bank is plowing billions of dollars into wealth services in China. HSBC has hired 600 wealth managers there as part of plans to add 3,000 over the next three to four years, said Quinn. He said these advisers will tap into the “huge opportunity” within China’s newly affluent, who are starting to think about how to manage their money as cities across the country urbanize and drive consumption higher.

This growth spurt comes as Beijing targets China’s tech billionaires, pushing for “common prosperity” with measures including income regulation and redistribution. The crackdown has triggered sell-offs in equity markets and prompted a wave of charitable giving among the country’s super-rich.

Quinn was working to tilt HSBC further toward Asia even before he became permanent CEO in March 2020, following several months as interim chief in the wake of John Flint’s abrupt exit. He is something of a departure from his predecessors, who typically spent decades as international managers. He attended Birmingham Polytechnic in central England and trained as an accountant before joining HSBC.

“I’m a simple banker,” he said, when asked his views on the resurgence of Covid-19 and whether markets needed to worry about inflation. He has more to say on HSBC’s overhaul.

HSBC has reduced risk-weighted assets in some of its unprofitable businesses by $85 billion out of a targeted $110 billion, but “there’s still more to do” said Quinn, adding that the bank is “on track” for its cost reduction plan. In May, HSBC sold out of mass-market banking in the U.S., and weeks later agreed to offload its unprofitable French retail business.

The lender is still the largest in Europe, yet it made almost two thirds of its pretax profits in Asia in the first half of the year, and it’s clear where the focus for the future lies. HSBC is moving several senior executives to Asia from London, although Quinn stresses that the bank won’t shift its headquarters away from the U.K. capital — and he won’t be moving either.

“I lived in Hong Kong and I loved it, but I’m going to stay in London,” said Quinn.

HSBC is using some of its redeployed capital in Asia for acquisitions. Last month the bank agreed to buy AXA Singapore for $575 million to build a global wealth hub in Singapore and fuel its expansion across Southeast Asia.

The bank is looking at two to four “bolt-on” acquisitions worth as much as $600 million each across Asia, including in China, Southeast Asia and India, according to Quinn. “So it’s not a big acquisition, any one of them, but it’s all about building out capability.”

Despite paring its presence in some parts of the world, Quinn said the bank is still a global institution — but a “more focused” one, “serving retail customers who want a wealth proposition globally.”

Meanwhile, the bank’s largest market of Hong Kong is posing several challenges. China last month delayed imposing an anti-sanctions law that could put global firms in the cross-hairs of conflict between the world’s two largest economies.

Quinn said that more clients have asked him about sanctions in recent months, but the issue is “not new.”

“Sanctions policy will hit you and you’ve got to deal with it, but we’ve been dealing with sanctions policy for the past 10 to 15 to 20 years,” he said. “You have to stay close with your clients and with the regulators to understand their requirements.”

The bank has also faced criticism for cooperating with a U.S. probe into Huawei Technologies Co. and supporting the security law imposed on Hong Kong. Quinn himself was grilled by U.K. politicians earlier this year, after the bank froze a former Hong Kong lawmaker’s account.

Despite the geopolitical tensions, Quinn sees the world’s second largest economy as open to foreign capital. “All the signals that I’m getting is China is still keen to open up the banking sector in the financial services sector in China.”

The CEO remains wary of taking the bank into the racier corners of the cryptocurrency markets, although he said HSBC could participate in central bank digital currencies or stablecoins in the future.

It’s not a case of U.K. or Chinese regulators deterring HSBC from crypto trading, according to Quinn. “Irrelevant. I look at it at the fundamental level and I say, it’s an emerging market,” he said. “Why would I do in the crypto world what I won’t do in the real world, in the hard currency world?”

In this market, at least, he’s happy to be on the sidelines, even if it means disappointing customers. “That’s life. At the end of the day, as a financial institution, you can’t chase every piece of business that’s going if you don’t think it’s the right piece of business.” – Bloomberg

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