HSBC to decide future of its London HQ within six monthsComments Off on HSBC to decide future of its London HQ within six months
The setting of a deadline came just a day before Chancellor George Osborne is widely expected to make concessions to banks in his key annual Mansion House speech.
This could include a reduction in the UK bank levy, which cost HSBC £700 million last year, more than any other bank, and will cost it even more this year.
HSBC said its board, headed by chairman Douglas Flint, would decide where the future headquarters of Europe’s biggest bank would be “towards the end of this year”.
The main choice is between its current headquarters in Canary Wharf and a return to its historic roots in Hong Kong. Singapore is seen very much as a third and less attractive option.
HSBC revealed the 11 criteria which the board is using to decide on its headquarters.
Key among these are economic importance and future growth, the regulatory regime, ability to attract and retain top talent, stability and tax of the country it chooses.
The UK bank levy is seen as a key factor because it is charged on the bank’s entire balance sheet, not just its UK assets.
Hong Kong not only has no such levy but also charges a lower rate of corporation tax. However, a move back to Hong Kong would mean ultimately that the bank would end up being regulated by China.
Gulliver said: “We believe that the world’s economy will continue to shift to the East. No decision has been taken yet and the debate has not yet started within the board.
“It is more than a tactical response to anything which has happened in the UK. Tax must be transparent, fair and competitive. ”
He added that as few as 250 people might be affected by any decision to move the headquarters from London, where 2000 people are employed in the group headquarters and that it would take around two years to do so once a decision is taken.
The news came as the bank said it will cut up to 25,000 jobs over the next three years with 8000 of those coming from its current UK workforce of 46,000.
Another 25,000 jobs will fall off its payroll as it said it will sell its large Turkish and Brazilian businesses. It will also cut back on investment banking activities, which employ 4000 people in London.
That will leave the bank with some 208,000 staff, down from 295,000 at the end of 2010.
The bank plans to cut costs by $4.5 billion (£2.9 billion) to $5 billion a year and then cut its balance sheet as measured by around a quarter, or $290 billion by 2017.
Gulliver said: “The world has changed and while we have done a huge amount to change HSBC we realise that there is a great deal more we must do.
“What we have done so far has been insufficient to drive a revaluation of the firm and uplift in the share price.”
But the bank also cut its target for return on equity, which Gulliver said was currently “unacceptable to all of us”, from its original 12%-15% by 2016 to “greater than 10%” by 2017.
Gulliver also revealed that the ring-fenced UK retail bank (formerly known as Midland Bank) would be broader than originally planned and have a new brand name.
It will move its headquarters to Birmingham, employ 26,000 staff and its revenues of some $11 billion would account for around two thirds of all UK revenues. Its brand name has not been decided.
He said: “We already run two separate banks in the UK, First Direct and Marks & Spencer bank. We need to differentiate between HSBC and the UK retail bank.”
Gulliver also said the bank had not yet decided whether or not it would retain the UK retail business or sell it.
HSBC – the criteria for moving:
– Economic importance and future growth
– Scale of existing HSBC presence
– Highly competitive economy
– Long-term stability
– Low corruption score
– Ability to attract and keep talent
– Freedom of commercial environment
– Tax system
– Government growth support
– Regulatory environment
– Financial impact on group