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Charges probe will hit profits, says HSBC
By Peter Thal L****n and Kate Burgess
Published: November 23 2007 20:36 | FT.com
The chairman of HSBC, Stephen Green, on Friday warned of a profits squeeze in the UK banking industry as a result of regulatory scrutiny of bank charges and the growing power of consumers.
Mr Green said a legal challenge to banks’ overdraft charges, due to be heard next year, could “change the economics of retail banking” in the UK, while growing use of the internet had made it easier for consumers to shop around.
“The net outcome of that is not that retail banking is going to become a low profitability business,” he told analysts Friday. “But it is going to be less profitable than it is and is going to be growth constrained.”
The warning from HSBC, which controls the UK’s fifth-largest retail banking network, highlights the continuing pressure on the industry following a sharp increase in bad debt charges last year. However, Mr Green was confident HSBC could buck the trend by concentrating on younger and wealthier customers and by offering them wealth management and insurance products.
On Friday HSBC ruled out large acquisitions in the US, western Europe or in investment banking as it set a target for raising the share of profits from emerging markets to 60 per cent from 51 per cent in the first half of the year.
The pledge underlines the change of direction at the bank since Mr Green’s predecessor, Sir John Bond, stepped down in May 2006.
Executives insisted they had no plans to withdraw from the US, where the bank has been hit by significant losses in the subprime mortgage meltdown.
But Mr Green hinted at possible disposals. “If there are areas of business where our capital is not earning a return and there is nothing we can do to restructure the business . . . then we will follow through on that.”
By Peter Thal L****n and Kate Burgess
Published: November 23 2007 20:36 | FT.com
The chairman of HSBC, Stephen Green, on Friday warned of a profits squeeze in the UK banking industry as a result of regulatory scrutiny of bank charges and the growing power of consumers.
Mr Green said a legal challenge to banks’ overdraft charges, due to be heard next year, could “change the economics of retail banking” in the UK, while growing use of the internet had made it easier for consumers to shop around.
“The net outcome of that is not that retail banking is going to become a low profitability business,” he told analysts Friday. “But it is going to be less profitable than it is and is going to be growth constrained.”
The warning from HSBC, which controls the UK’s fifth-largest retail banking network, highlights the continuing pressure on the industry following a sharp increase in bad debt charges last year. However, Mr Green was confident HSBC could buck the trend by concentrating on younger and wealthier customers and by offering them wealth management and insurance products.
On Friday HSBC ruled out large acquisitions in the US, western Europe or in investment banking as it set a target for raising the share of profits from emerging markets to 60 per cent from 51 per cent in the first half of the year.
The pledge underlines the change of direction at the bank since Mr Green’s predecessor, Sir John Bond, stepped down in May 2006.
Executives insisted they had no plans to withdraw from the US, where the bank has been hit by significant losses in the subprime mortgage meltdown.
But Mr Green hinted at possible disposals. “If there are areas of business where our capital is not earning a return and there is nothing we can do to restructure the business . . . then we will follow through on that.”
