HSBC job cuts are a sign the global bank is getting smarter not smaller

HSBC is scaling back the unprofitable businesses it has bought or tried to develop and focussing on where it makes money: Asia. The question is how far it should reverse its expansion strategy, writes Hamish McRae

Pedestrians walk past HSBC in Hong Kong, where the bank was founded (Getty)

What is happening at HSBC is encapsulated in three stories. One is about the bank itself. One is about banking as an industry. And one is about the way the global economy is pivoting to Asia.

HSBC matters a lot. It is Britain and Europe’s biggest bank, arguably the only UK or European financial organisation to have credible global ambitions. It is still huge and still profitable. But profits were down by a third, and now it is both cutting jobs and, to some extent at least, scaling back those ambitions.

To understand what is happening you have to recognise that it is basically a stunningly profitable Hong Kong bank that has used those profits to turn itself into a global one. So over the past 30 years it has bought financial institutions around the world, starting with Midland Bank in the UK in 1992, Marine Midland in the US five years later, and a string of other institutions since then. Some, such as Midland, have been successful. Others, notably the US mortgage group, Household International, which got caught in the American housing market crash, have been disastrous. Some other purchases have not done too well either.