If EJ Thribb was writing a “So farewell” eulogy in Private Eye for HSBC, it might begin like this:
“So farewell then, HSBC,
Off back to Hong Kong,
You were never at home here,
Neither did we like you much…”
For some time now, that’s been the mood about HSBC. A foreign bank from a distant land, that came here big time in 1992 when it bought dear old Midland, but in its attitudes and culture, never shook off its “Honkers and Shankers” roots.
Do not be surprised if the bank’s board votes shortly to “go home” to Hong Kong. All the signs are in that direction – not least this week’s announcement that 8,000 UK jobs are going, as part of a global cut of 50,000. In a five-hour presentation to the City, “Actions to capture value from our global presence in a changed world” (they don’t do short and to the point, do bankers), the group’s chief executive Stuart Gulliver left them under no illusion: Asia is where it’s at; the UK is so over.
The figures say so: 78.3 per cent of HSBC’s $18.68bn (£12.04bn) annual profits last year derived from Asia, versus 3.2 per cent from Europe). Of its 48,000 employees in the UK, here, most work in high street branches or at Canary Wharf. By 2019, HSBC must ring-fence its retail business to keep consumer deposits away from the investment bankers. In his speech, Gulliver surprised analysts by saying that as much as possible of its UK activities would be put into a new, rebranded retail bank to be run from Birmingham. The fact it is being renamed, and a whole host of UK operations included, suggests only one outcome: HSBC will one day sell this new bank as a standalone business.
HSBC would not confirm how many branches will close. Currently, it has 1,057. The only figure it would give was 12 per cent of branches across its seven markets. If they stick to that proportion for the UK, that’s 127 due to perish. Don’t be surprised if, in a Britain with competing banks, and shifting rapidly online, the final tally is higher.
It’s still possible to make a profit out of the ordinary person and offer a good service in return – as the rise of the “challenger” banks is proving. But for the big boys, the returns are small compared to what they can rake in elsewhere, from commercial and investment banking. Inevitably, within those giants, the UK high street has an increasingly reduced voice. Branches close or become run-down, service suffers, queues lengthen, profits from them decline still further, and so the spiral continues.
In theory, the bank’s directors will consider 11 criteria to decide whether to remain here, including government support for financial services, the tax system, ability to retain top talent, rule of law, and cost of the move. The reality is that the 11 boxes are a fig leaf. What matters is what Gulliver and his colleagues want, and as his talk made clear, they’re drawn to Hong Kong.
They manage one of the world’s biggest banks. It’s a huge business success story, an essential provider of UK jobs, a massive supplier of taxes. Yet, instead of laying out a red carpet, government ministers, other politicians and the media give them a pasting. And HSBC has provided plenty of ammunition – it’s been caught mis-selling its products to customers who did not need them, money laundering for Mexican drug cartels, rigging the foreign exchange markets, and sheltering customers from UK taxes in Switzerland.
To his undisguised fury, Gulliver himself was required to explain (not very convincingly) why he had non-domicile tax status, a Swiss bank account and a Panamanian trust. Apparently this is not how you treat one of the world’s most powerful businessmen; it is not the correct response of a grateful, cap-doffing society.
One aspect that irks HSBC, wearing its multi-national hat, is that, of all countries, the UK has cracked down hardest on banks, with a bank levy it sees as simply unfair. It is imposed on the global operations of UK banks, but only on the UK operations of foreign banks, so HSBC registered here is clobbered. But put that in context. HSBC has paid $3bn so far in bank levy. That, however, is far short of the $11bn handed over in fines and legal and regulatory bills.
The levy, though, is about sentiment as much as cost. Gulliver thinks we indulge in “banker bashing” far too much and it’s gone on for too long. Again, he may be right. But as an economy heavily skewed towards financial services, we were hit hard by the banking collapse. And, it’s the bankers themselves who are to blame for scandal after scandal, not anyone else.
Gulliver and his chairman, Douglas Flint, believe the world has moved on. They can’t help noticing that they’re treated with far more respect abroad, especially in Hong Kong and China, than they are in Britain. While we’re banging on about bonuses and trying to ring-fence their operations, in Asia they’re greeted with open arms.
For all that, though, the truth is that HSBC has never felt happy here. Historically, emotionally, it does not belong. I remember once admiring the view from the Canary Wharf office of the then HSBC chairman, Stephen Green. It was spectacular, with the City and Tower of London in the near-distance, Parliament beyond, and the silver Thames wending between them. Green looked, and said, “It’s not as good as Hong Kong harbour.”
Don’t be surprised if HSBC goes, but don’t shed any tears either. It will still be a major employer here; it will remain a large player. Its bosses, though, will be somewhere else. They were always going to return; it was only a matter of time, and finding the excuse.