HSBC Announces Dramatic Makeover That Splits Lender East and West

They tried East meets West; now, they’re just doing their best.

HSBC, long one of the world’s most active cross-border lenders, announced a sweeping restructuring Tuesday that will cut costs and, if all goes as planned, ease increasingly tense geopolitical relations by splitting its footprint between East and West.

‘Dirty Work’

HSBC has a unique corporate structure among major lenders. It’s headquartered in London, but most of its profits come from China and Hong Kong — $16 billion versus $30 billion worldwide last year. This setup, however, has led to major whiplash for executives torn between the clashing demands of regulators in Britain and China.

From 2019 to 2021, furious at HSBC for cooperating with a US investigation into a Huawei executive, Beijing retaliated by cutting back on state companies’ business with the bank. In the fourth quarter of 2019 through all of 2020, HSBC canceled dividend payouts to shareholders under pressure from the Bank of England to shore up balances. The same year, Beijing led an authoritarian crackdown on Hong Kong, during which HSBC froze the accounts of democracy activists. UK legislators found the bank complicit in human rights violations by denying pensions to people who fled the crackdown, and accused it of “doing the dirty work of the Chinese Communist Party.” HSBC said it has to follow the rules where it operates.

Last year, the £120 billion ($156 billion) lender fended off a rebellion by Chinese insurance giant Ping An, which demanded it hive off its western businesses and move its headquarters to Asia (HSBC stands for The Hongkong and Shanghai Banking Corporation, after all). With geopolitical tensions poised to heighten, the bank announced a swift and sweeping reorganization:

• Beginning Jan. 1, 2025, HSBC will be reorganized into four standalone units, with the UK and Hong Kong businesses on their own. The other two units will be “corporate and institutional banking” and “international wealth and premier banking.”
• HSBC will divide its operations between an “Eastern markets” division, overseeing Asia-Pacific and the Middle East, and a “Western markets” division, overseeing its non-ring-fenced UK bank, Europe, and the Americas.

Jury’s Out: HSBC gave scant detail on its plans to cut costs, though it said it will slash its 18-member executive committee and replace it with a 12-member “operating committee.” The lack of clarity left analysts wanting more info. UBS analyst Jason Napier noted the reorg itself could come with a hefty price tag: “Aligning functions for a group with 213,978 staff involves exceptional costs.”