HSBC Exits US Mass Market Retail Banking

Edited by: TJVNews.com

HSBC Holdings announced on Wednesday that it will exit its US domestic mass market retail banking business through several transactions, pending regulatory approval.

The Wall Street Journal reported that HSBC said it will retain around two dozen locations, which will become international wealth centers providing banking and wealth-management services to high-net-worth clients. A spokeswoman said these centers would be in cities such as New York, Washington, D.C., San Francisco, Seattle, Los Angeles and Miami.

It will go from about 1.4 million customers to roughly 300,000 in the U.S, according to the WSJ report.  It will no longer service customers with basic bank accounts, or those with balances below $75,000, and businesses with turnover of $5 million or less. The bank will keep U.S. clients with Jade accounts containing at least $1 million in cash and investments and Premier accounts with more than $75,000.

HSBC will transfer East Coast customers to Citizens Bank and West Coast customers to Cathay Bank when the transactions are due to be completed in the first quarter of next year. HSBC services will continue until then, the bank said, including at its branches. Accounts of customers who live abroad will also be transferred unless they have enough money to meet HSBC’s new minimum requirements, as was reported by the WSJ.

As a result, HSBC Bank will reposition its US Wealth and Personal Banking business to focus on the banking and wealth management needs of globally connected affluent and high net worth clients. HSBC will exit its domestic mass market retail banking business and retail business banking (collectively the ‘Business’) through a number of divestitures, and wind-down of the residual branch network. HBUS has entered into sale agreements, subject to regulatory approval, with Citizens Bank and Cathay Bank for certain parts of the Business.

Michael Roberts, CEO, US and Americas, said:

“This announcement is an important step towards becoming a more focused, simpler and sustainably profitable organization. A strong, internationally connected US business is an important part of HSBC’s value proposition, and we are excited to be focusing the US business in areas of competitive strength. At the same time, I am very pleased that we were able to execute this strategic repositioning at pace. It was also important for us to find buyers who would be a good fit for our customers and employees.”

HSBC announced earlier this year that it was exploring strategic options with respect to its US retail franchise, including organic and inorganic options to improve the profitability of its US retail business. The announced transactions are expected to close by the first quarter of 2022, subject to regulatory approvals. We expect US$0.1bn of pre-tax costs to be incurred in connection with these transactions after which HSBC does not expect to generate a significant gain or loss. The risk weighted assets (on a PRA basis) associated with the announced transactions were c.US$1.8bn at 31 March 2021 and no material impact is expected on the Group’s CET1 ratio.

London-based HSBC is one of the world’s largest banks, but its focus is primarily in Hong Kong, where it was founded, and elsewhere in Asia, and in the U.K. and Europe, according to an AP report.

AP also reported the business is small, making it hard to compete against big banks like JPMorgan Chase, which dominate on the East Coast. “They are good businesses, but we lacked the scale to compete,” said HSBC’s CEO Noel Quinn said in a statement.