HSBC is set to acquire Citigroup’s China consumer wealth management business, which manages more than $3 billion in assets, two sources with knowledge of the matter said, in a significant boost to the London-based bank’s business in that country. The transaction, the financial details of which were not immediately known, will also see Asia-focussed HSBC take over “a few hundred” of Citi’s China-based staff, said one of the sources, who was not authorized to speak to media. The deal is expected to be announced next month, the source added.
The acquisition will allow HSBC to strengthen its wealth management services in a market with a strong presence while also allowing the bank to expand its funds distribution operations and tap into the growing demand for Chinese securities by local investors, the source added. The addition comes amid a significant push by the London-based lender to expand its presence in Asia as it shifts resources away from less profitable parts of the globe.
HSBC’s chief executive, Michael Geoghegan, moved to Hong Kong from London in February to strengthen the bank’s links to China and other emerging markets. Earlier this year, the bank scored a first-of-its-kind fund distribution qualification in China and opened an investment banking office in Shanghai.
Aside from the fund distribution license, HSBC has a substantial retail and commercial banking business in China and is viewed as a trusted partner by Beijing. This could help the bank navigate challenges such as trade friction with the United States, which has sparked concerns that it may be forced to scale back its business in the world’s second-biggest economy.
Despite concerns about global growth and geopolitics, many analysts say the long-term outlook for HSBC remains robust. The bank’s exposure to Asian economies and strong position in the world’s largest consumer market mean it is well-positioned to ride out the current turbulence.
However, some investors question the strategic direction of HSBC’s management. Knight Vinke, an asset management firm based in Monaco with a small stake in the bank, has pushed management to abandon its ill-performing operations in the United States and focus on Asia. “They have something in the market which no other bank has: a heritage, footprint, and deep connections in a way that Barclays, JPMorgan, and Citi do not,” Glen P. Suarez, a senior executive at Knight Vinke, told CNN.
Regardless of the ups and downs in the short term, a shift to Asia is a sound move for HSBC, which has a good reputation for supporting local tech start-ups. Louis Tse Ming-Kwong, managing director of Hong Kong-based brokerage Wealthy Securities, said the lender could increase its lending and offer other services to these technology companies, which would help bolster its future big clients. HSBC could also offer credit to new entrants in the fast-growing insurance sector. In that way, it could diversify its revenues and reduce its overall risk.
