Investors in HSBC are supporting management efforts to close sections of its investment bank while optimism grows about increased capital markets activity due to President Donald Trump's deregulatory agenda. Shareholders propose cutting HSBC's mergers and equity capital markets teams in the Americas and Europe to focus on its core Asian markets. HSBC has been progressively downsizing its global presence and shedding low-return businesses over the last decade.
Pressure is mounting on CEO George Elhedery to shift capital focus to Asia amidst concerns about the impact of global trade uncertainties on major trade finance providers like HSBC. The move aims to tap into healthier regional trading prospects. While discussing challenges faced by global businesses, Alex Potter, investment director at HSBC shareholder abrdn, pointed out the difficulties foreign banks face in gaining U.S. market share in equity investment banking.
Elhedery is expected to reveal more details of his strategic plan for HSBC during the upcoming full-year results announcement, with potential cost savings from restructuring. Observers anticipate savings of £1.2-3 billion partly through additional management role cuts. HSBC's shares in London have increased by 11.5% this year after a 20% rise in 2024.
Sajeer Ahmed, global equities portfolio manager at HSBC investor Aegon Asset Management, highlighted the meticulous evaluation of each business for sustainable profitability. He noted that HSBC aims for a return on tangible equity (ROTE) of around 16%, aiming to narrow the valuation gap compared to U.S. banks with similar returns.
Elhedery's strategy prioritizes profitability over expansion to close the valuation gap, recognizing competition from U.S. banks. Analysts predict HSBC's full-year profit to remain stable at $31.6 billion, following a substantial increase in 2023.
Concerns arise about managing the optics of removing key personnel as Trump-led deregulation and industry consolidation may boost these teams in 2025. Employee morale is a concern among affected and related divisions within the bank.
Amidst debates about the East vs. West focus, Alex Marshall, managing partner at CIL, stresses the growth potential in Asian capital markets compared to Europe. As HSBC recalibrates its strategic direction, the focus on Asia presents significant growth opportunities.