HSBC Holdings PLC CEO Noel Quinn is confident the bank can navigate through U.S. sanctions on China over Hong Kong, but he made it clear at third-quarter results that HSBC regards future growth in Asia as vital.
The U.S. has imposed sanctions on Chinese officials who it said were involved in passing a new security law that has been opposed by demonstrators on the streets of Hong Kong. China, meanwhile, has outlined potential sanctions of its own in retaliation. HSBC has been criticized by the U.S. for indicating support for the new law, while China has criticized the bank for providing evidence to U.S. authorities in its case against Huawei CFO Meng Wanzhou.
The bank itself has not been sanctioned, and experts think it is likely to escape the worst of the potential fallout from the U.S. sanctions.
"We are confident in our ability to navigate the increasingly complex regulatory environment," Quinn said. "We are committed to complying with the laws and regulation in every market that we operate in. We fully acknowledge that there is a level of complexity there today, given the geopolitics, but we are confident of our ability to navigate that situation."
But he made clear the bank's commitment to Hong Kong and the wider region, saying HSBC would step up its investment in Asia on the back of an economy that was rebounding strongly from the pandemic, led by a pick-up in manufacturing and trade.
"Our Asia opportunity is growing and we're stepping up investment to capture it," he said. "Previously, just under half of our growth investment was aimed at Asia; now, a large majority of our future growth investment will go to growing our Asia wealth, wholesale and sustainability franchises, as well as reinforcing our position in Hong Kong and extending our position in the greater bay area and south Asia."
He said that in the past 12 months, the Asia business' share of group risk-weighted assets had increased by 3 percentage points to 44%, and that the number would keep growing as the bank reallocates additional capital to the region.
The Asia business reported higher deposits in the quarter — up 7% year over year in Asia and 5% in Hong Kong — and stable lending at $484 billion with Hong Kong up 3%, said Quinn. Expected credit losses in Hong Kong were $100 million, down 49% year over year.
HSBC said it will accelerate its restructuring plan, cutting costs further than previously suggested and said it would update the market with more detail in February. It has delivered $600 million in cost savings year-to-date.
"We now expect to exceed our $100 billion risk-weighted assets gross reduction target in 2022, with around $50 billion of that total expected by the end of 2020," Quinn said.
"We can go much further [in Asia] and we're backing up our ambition with investment to match. Our technology investment is critical, not just to provide new capabilities to our customers but also to boost efficiency and reduce long-term costs," the CEO said.
He said the bank would continue to invest in technology in Asia even as it reduced spending elsewhere.
Technology investments include VisionGo, a platform connecting small and medium enterprise service providers and customers in Hong Kong, which has attracted 8,000 members since its launch in April.
It has also created Pinnacle, a wealth management platform in China. The bank expects to deploy about 2,000 to 3,000 more salespeople based in China over the coming two to three years, serving the population's wealth management needs, Quinn said.
Quinn and Ewen Stevenson, group CFO, also made it clear that the bank intends to return to paying a dividend, after the Bank of England made it clear to banks at the start of the pandemic that they should not make such payouts this year.
Stevenson said management is focused on the path back to paying dividends, but added: "I would caution about getting ahead of yourselves on distributions. When we start, we'll start conservatively and look to build sustainably."
Despite HSBC's focus on Asia and the prospect of the U.K. bank levy affecting its results in the fourth quarter, Quinn made it clear that the question of where the bank was domiciled — London, as presently, or Hong Kong — was settled and the bank had no intention of revisiting the issue.