As HSBC pivots its business even further towards Asia, it’s prioritising wealth management and private banking for expansion and hiring. The planned growth, outlined in HSBC’s strategic review today, comes as HSBC tries to catch up with the market leaders in Asian private banking, UBS and Credit Suisse.
HSBC’s strategy review states that it will accelerate “the shift of capital to areas, principally Asia and wealth, that have demonstrated the highest returns and where we have sustainable advantage through scale”. The percentage of group tangible equity allocated to HSBC’s wealth and personal banking (WPB) division is expected to rise from 25% in 2020 to 35% over the “medium to long term”.
WPB was formed in the second quarter of last year by combining high-end private banking, mid-market wealth management, and mass-market personal banking. It’s the first two of these segments that HSBC’s strategy is most focused on, particularly in Asia, its largest market. HSBC wants to become “the number one wealth manager in Asia in the medium to long term”, according to its strategy.
Some of this growth is focused on mainland China, where the bank launched a digital wealth platform, Pinnacle, in June last year, and announced in August that it would hire 3,000 “digitally-enabled” wealth planners by 2024. This hiring has got off to a slow but steady start. Nuno Matos, chief executive of WPB, said today that by end of 2020, HSBC had hired almost 200 wealth managers in Shanghai, Guangzhou, Hangzhou and Shenzhen. Matos is among a trio of senior executives moving to Hong Kong later this year.
But HSBC’s expansion isn’t all about mass-affluent banking in China. Private banking, centred on the offshore hubs of Hong Kong and Singapore, is also a key focus. HSBC CEO Noel Quinn said today that the bank wants to be a “market leader for high net worth and ultra-high net worth clients in Asia and the Asian diaspora”.
This means HSBC will further expand its private banking headcount in Hong Kong and Singapore in a bid to boost its Asian assets under management, say headhunters. HSBC’s private bank managed $151bn in assets in Asia at the end of 2019, compared with $450bn and $227bn for market leaders UBS and Credit Suisse, respectively, according to latest available data from Asian Private Banker.
While the strategic review puts Asian private banking under the spotlight at HSBC, the bank has been boosting its headcount for the past two years. Its workforce of Asian RMs increased 19.2% year-on-year to reach 645 at the end of 2019, the highest organic rise of any top-10 bank in the region. It made several senior private banking hires in 2020, including taking on Hong Kong-based Cedric Chan from Julius Baer as a managing director for UHNW clients. Greg Hingston, head of WPB for APAC, said last year that HSBC wants to grow its market share in the UHNW segment.
Last week, HSBC named Fan Cheuk Wan, Patrick Ho, and James Cheo as chief investment officers for private banking and wealth management for Asia, North Asia and Southeast Asia, respectively. These internal appointments are designed to deliver “common house views across private banking and wealth management as HSBC ramps up resources to grow and scale its wealth management franchise in Asia,” according to a statement.
But while integrating private banking with wealth management and personal banking brings benefits of scale, there are potential downsides for HSBC’s private bankers. “The integration may potentially create issues in terms of lending, product expertise etc. You need to have a differentiator in your offering to a $500k AUM client and a $5m one. It can’t be the same,” says former HSBC banker Rahul Sen, now global head of private wealth management at The Mulsanne Partnership. “But overall HSBC has a strong private bank to attract new talent in Asia,” he adds.
Globally, revenue for 2020 private banking was $100m, a 7% year-on-year decrease, as net interest income fell as a result of lower global interest rates. Investment revenue increased, however, reflecting market volatility and higher fees from advisory and discretionary mandates.
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