HSBC cuts investment banks in UK and Europe to focus on Asia

The bank will withdraw from providing equity capital markets and advisory services outside its primary operations in Asia and the Middle East, according to a memo released on Tuesday.

The withdrawal process is expected to unfold over the coming months, with HSBC set to begin discussions with clients about closing its Western investment banking businesses.

The bank will continue to operate its debt markets, loans for high-risk investments, real estate finance, and infrastructure finance in Western countries.

The units “really don’t have scale”, a person with knowledge of the decision said. “It was just a very tough job to build up to a level where [HSBC] has a competitive edge.”

HSBC has confirmed it will ensure the completion of any ongoing deals and mandates during the wind-down process. The bank plans to focus its merger and acquisition (M&A) and stock market operations in Asia and the Middle East, while ending these activities in Europe, the UK, and the Americas.

The move, first reported by Bloomberg, comes as part of CEO Georges Elhedery’s restructuring is plan to split the bank into separate "eastern" and "western" divisions. The plans aim to to make $3bn (£2.4bn) of cost savings.

Elhedery, who became HSBC's first Mandarin-speaking CEO last year, is leading a major reorganisation of the bank. Last year, the bank announced it would divide its operations by geography into Eastern and Western markets.

Elhedery’s plan to streamline HSBC has already seen the firm lay off scores of senior bankers, with expectations that over 40 per cent of HSBC’s top 175 managers will be axed.

Some members of Parliament are concerned that this move could shift HSBC's focus away from the UK and make it harder to oversee its business in Asia.

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In the first half of last year, investment banking made up only six per cent of HSBC's total revenue, which had dropped by three per cent compared to the previous year.

A HSBC spokesman said: "As part of our ongoing efforts to simplify HSBC and increase leadership in our areas of strength, we are finalising a review of our Investment Banking business.

"We will retain more focused M&A and equity capital markets capabilities in Asia and the Middle East and will begin to wind down our M&A and equity capital markets activities in the UK, Europe, and the US, subject to local legal requirements."

The strategic shift comes amid growing focus on HSBC's relationship with China, where tensions have previously led to shareholder activism.

Chinese insurer Ping An, HSBC's largest investor, attempted an unsuccessful shareholder rebellion two years ago to break up the bank.

The bank's strengthened ties to Asia have become particularly relevant as Britain seeks to reset its relationship with China.

Labour's Rachel Reeves, the Chancellor, recently led a delegation to China alongside HSBC leadership, stating that China was "crucial" to growing the UK economy.

The bank has faced scrutiny since 2020 when it supported Beijing's authoritarian crackdown in Hong Kong.