Latest: HSBC leaders eject climate protesters from annual meeting
IF a bank can have a personality, then HSBC’s is split.
There’s the head office in London’s Canary Wharf. And on the other side of the world, in Hong Kong, there is a tower known as “HSBC Main Building”, in other words, it is not a headquarters.
They were both designed by the same architect, Norman Foster. The actual HQ is 45 storeys, and the older, Hong Kong building is 44. London has the bigger floor area.
This is not by chance. It’s deliberate. For HSBC, “home” from 1865 until 2003 was Hong Kong. Since then it’s been London.
Except, it does not feel like home at all. If you go to Hong Kong, where I was recently, the presence of HSBC is unavoidable. The bank is everywhere, from the towering main premises at 1 Queens Road Central, the grandest address, overlooking the harbour, to numerous other locations. As are its employees — I lost count of how many I encountered. It feels right, as if the bank is part of the very fabric of the place and with that, the surrounding region.
In London, HSBC is one of many. Even its skyscraper, which it is considering leaving or reconfiguring for something smaller, is largely anonymous.
Try as it might, HSBC is not in Britain’s DNA. It has never been loved or accepted, not in the same way as Lloyds, Barclays, National Westminster or Midland, which it swallowed. It sticks to its initials, HSBC, and dare not call itself by its real name, Hongkong and Shanghai Banking Corporation, for fear of losing business. Lloyds is currently running warm, feel-good adverts based on its iconic black horse; HSBC’s ads by contrast, emphasise its global power and reach.
All this will come to a head on Friday this week, with the HSBC annual shareholders' meeting in Birmingham. Ping An, the Chinese insurer and the bank’s largest shareholder with 8.3 per cent, is agitating for the giant financial group to split in two, between Asia and the rest.
The simple argument is that the corporation finds it easier to make money in Hong Kong, China and the neighbouring centres than it does in other parts of the world. The one is effectively subsidising the other. Let HSBC Asia play to local strengths and historical and cultural ties; let the rest focus on what it does best.
Try as it might, HSBC is not in Britain’s DNA. It has never been loved or accepted
Ping An maintains the bank is held back, caught between the West and China — not a good spot to be as tensions between the two heighten. Far better, they claim, to let one half of the business be listed in Hong Kong, its biggest market (HSBC would remain a controlling shareholder, but the spun off part would, to all intents and purposes, be a Hong Kong, and therefore China, entity).
That’s not how the bank, led by Noel Quinn, the chief executive, sees it. Their business model, he says, is based on HSBC enjoying “international connectivity”.
His strategy is still to focus on Asia, while dropping non-core activities elsewhere, and still run everything from London.
Ping An has been bolstered by anger among the bank’s army of Hong Kong retail investors, many of them former employees, at the Bank of England’s intervention during Covid to prevent the payment of dividends. They rely on those payouts for their income and as they saw it, here was the imperialist institution denying them their right. “Their” HSBC, listed in Hong Kong, would not be under the thumb of the Bank of England and other UK regulators.
There is a certain irony to all this. In 2012, HSBC was fined the biggest amount in US history, $1.8bn, for facilitating the laundering of money by the Mexican Sinaloa drugs cartel, controlled by “El Chapo”. The US authorities wanted to bring prosecutions and possibly jail, senior HSBC executives. The British government leapt to HSBC’s defence, saying that would run the risk of bringing down the bank and with it, the entire banking system. In the end, as I relay in my book, Too Big To Jail, the Americans relented and stuck to the fine and requiring HSBC to undergo a six-year reform programme.
I’m often asked, yes, so where has the Sinaloa cartel gone for its banking services? The cartel is as strong as ever, so it must be washing its dirty money somewhere. The answer is China. A critical part of the Sinaloa’s laundromat was in the Cayman Islands — HSBC opened the offshore haven to the mobsters and allowed them to clean their drugs proceeds there, for onward transmission into the world’s legitimate financial networks.
HSBC closed the Cayman operation responsible, but it is noticeable just how many banks and financial bodies from China have since been applying for Cayman banking licences. Sure enough, last week, a US congressional hearing was told that Chinese criminals are helping Mexican drug cartels bypass banking and regulatory crackdowns in the US and Mexico with the help of Chinese banks and expatriates keen to buy illicit dollars. The trade had been exacerbated by a breakdown in communications between the US and China, and Beijing’s refusal to acknowledge any Chinese wrongdoing.
At the session on drug financing, Lisa McClain, a Republican congresswoman from Michigan and chair of the House subcommittee on health care and financial services, said that China was the “global hub” of money laundering. “The State Department estimates that $154bn in illicit funds pass through China each and every year,” she said.
So, if Ping An and the Hong Kong ordinary investors succeeded, HSBC would become smaller and no longer too big to pursue, but at the same time, a major part of the existing HSBC could fall under the regulatory influence of China, which the US accuses of displaying a disregard to money laundering, certainly where it is concerned (the US subtext being that China is happy to see America continue to grapple with a never-ending drug problem).
They are not likely to win. Most HSBC institutional shareholders are thought to oppose the break-up. They claim the bank benefits from being truly international and those profits would be lost. Two investor advisory groups, Institutional Shareholder Services and Glass Lewis, have declared in favour of HSBC remaining as it is. Meanwhile, analysts at the stockbroker Keefe, Bruyette & Woods estimate the split would cost between $10 billion and $13 billion to implement. They also say their analysis “suggests little in the way of ‘hidden value’” that could be unlocked.
HSBC’s status quo case is reinforced by a just-revealed, whopping 212 per cent increase in profits. For the first quarter, the bank made a pre-tax profit of $12.9 billion, up from $4.2 billion for the same period last year.
Come Friday, nothing is likely to change. But that does not mean the pressure has gone away. Hong Kong and China are unlikely to rest until HSBC heads home.
Chris Blackhurst is the author of Too Big To Jail: Inside HSBC, the Mexican drug cartels and the greatest banking scandal of the century (Macmillan)
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Consoles: PC, PlayStation 4/5, Xbox Series X/S
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Cases of coronavirus in the GCC as of March 15
Saudi Arabia – 103 infected, 0 dead, 1 recovered
UAE – 86 infected, 0 dead, 23 recovered
Bahrain – 210 infected, 0 dead, 44 recovered
Kuwait – 104 infected, 0 dead, 5 recovered
Qatar – 337 infected, 0 dead, 4 recovered
Oman – 19 infected, 0 dead, 9 recovered
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
PSL FINAL
Multan Sultans v Peshawar Zalmi
8pm, Thursday
Zayed Cricket Stadium, Abu Dhabi
What are the influencer academy modules?
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The National's picks
4.35pm: Tilal Al Khalediah
5.10pm: Continous
5.45pm: Raging Torrent
6.20pm: West Acre
7pm: Flood Zone
7.40pm: Straight No Chaser
8.15pm: Romantic Warrior
8.50pm: Calandogan
9.30pm: Forever Young
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Fixtures
Sunday, December 8, Sharjah Cricket Stadium – UAE v USA
Monday, December 9, Sharjah Cricket Stadium – USA v Scotland
Wednesday, December 11, Sharjah Cricket Stadium – UAE v Scotland
Thursday, December 12, ICC Academy, Dubai – UAE v USA
Saturday, December 14, ICC Academy, Dubai – USA v Scotland
Sunday, December 15, ICC Academy, Dubai – UAE v Scotland
Note: All matches start at 10am, admission is free
RACE RESULTS
1. Valtteri Bottas (FIN/Mercedes) 1hr 21min 48.527sec
2. Sebastian Vettel (GER/Ferrari) at 0.658sec
3. Daniel Ricciardo (AUS/Red Bull) 6.012
4. Lewis Hamilton (GBR/Mercedes) 7.430
5. Kimi Räikkönen (FIN/Ferrari) 20.370
6. Romain Grosjean (FRA/Haas) 1:13.160
7. Sergio Pérez (MEX/Force India) 1 lap
8. Esteban Ocon (FRA/Force India) 1 lap
9. Felipe Massa (BRA/Williams) 1 lap
10. Lance Stroll (CAN/Williams) 1 lap
11. Jolyon Palmer (GBR/Renault) 1 lap
12. Stoffel Vandoorne (BEL/McLaren) 1 lap
13. Nico Hülkenberg (GER/Renault) 1 lap
14. Pascal Wehrlein (GER/Sauber) 1 lap
15. Marcus Ericsson (SWE/Sauber) 2 laps
16. Daniil Kvyat (RUS/Toro Rosso) 3 laps
More on Yemen's civil war
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North Pole stats
Distance covered: 160km
Temperature: -40°C
Weight of equipment: 45kg
Altitude (metres above sea level): 0
Terrain: Ice rock
South Pole stats
Distance covered: 130km
Temperature: -50°C
Weight of equipment: 50kg
Altitude (metres above sea level): 3,300
Terrain: Flat ice
A list of the animal rescue organisations in the UAE
More on Quran memorisation:
Quick pearls of wisdom
Focus on gratitude: And do so deeply, he says. “Think of one to three things a day that you’re grateful for. It needs to be specific, too, don’t just say ‘air.’ Really think about it. If you’re grateful for, say, what your parents have done for you, that will motivate you to do more for the world.”
Know how to fight: Shetty married his wife, Radhi, three years ago (he met her in a meditation class before he went off and became a monk). He says they’ve had to learn to respect each other’s “fighting styles” – he’s a talk it-out-immediately person, while she needs space to think. “When you’re having an argument, remember, it’s not you against each other. It’s both of you against the problem. When you win, they lose. If you’re on a team you have to win together.”
The years Ramadan fell in May
Ticket prices
- Golden circle - Dh995
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- Lower Bowl Platinum - Dh95
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- Upper Bowl Premium - Dh395
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The biog
Age: 59
From: Giza Governorate, Egypt
Family: A daughter, two sons and wife
Favourite tree: Ghaf
Runner up favourite tree: Frankincense
Favourite place on Sir Bani Yas Island: “I love all of Sir Bani Yas. Every spot of Sir Bani Yas, I love it.”
SPECS
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