HSBC has launched a review into its Canadian business that could end in a US$9B sale, as the bank faces pressure to ditch less profitable markets to focus on Asia and Europe.
Catch up: The London-based bank operates in ~60 countries but makes most of its profits in Asia. In Canada, it grew through the acquisition of the Bank of BC to 130 locations today.
Why it matters: In a market dominated by five banks, HSBC Bank Canada plays an important role by adding more competition to the mix, especially for immigrants’ business.
- HSBC bridges the financial gap for Canadians switching banks from Asia (in 2016, over 48% of newcomers to Canada were born in Asia, including the Middle East).
- The newcomer play is really smart since acquiring customers in a saturated market takes a bottomless ad spend (what, you think getting the guy from New Girl is cheap?!) and costly switching bonuses.
Why it’s happening: The bank’s largest shareholder, Chinese insurer Ping An, is doing that thing shareholders do when they push for opportunities for more cash money dollar$.
- The bank reported a return on equity of 9.9% in its half-year results but is targeting at least 12% from next year (over 10% is the goal in the banking world).
- Selling HSBC in Canada would also alleviate the need to navigate geopolitical tensions as government trips to Taiwan become increasingly en vogue.
Yes, but: Just because you google the blue book value of your car doesn’t mean you’ll sell it. A sale of this size only happens in favourable market conditions and with the right buyer.
Zoom out: HSBC has already left Brazil, reduced operations in France, is in the process of exiting Greece and is reducing operations in South Africa… so. many. savings.