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HSBC investors are backing CEO Georges Elhedery’s decision to scale down parts of the bank’s investment banking operations, even as expectations of a U.S. market boom rise under President Donald Trump’s deregulation policies.
Refocusing on Core Strengths
Key shareholders, including two of HSBC’s 20 largest investors, support the recent move to shut down the bank’s mergers and equity capital markets teams in the Americas and Europe. This strategic retrenchment aligns with HSBC’s long-term vision of strengthening its foothold in Asia, where it maintains its most profitable operations.
Once a vast global institution spanning over 100 countries, HSBC has spent the last decade streamlining operations, exiting low-yield markets, and focusing on core regions that generate sustainable returns. With U.S. tariffs threatening global trade flows, investors see Elhedery’s push to channel capital into Asia’s growing economies as a prudent decision.
“Geopolitics are making it increasingly difficult for global businesses,” noted Alex Potter, investment director for European equities at HSBC shareholder abrdn. “Foreign banks have struggled to gain significant market share in U.S. equity investment banking, even after years of investment.”
Financial Restructuring and Cost Savings
Elhedery is expected to provide more details about HSBC’s restructuring plan during its full-year earnings report on February 19. Internal sources suggest the bank could realize cost savings between £1.2 billion and £3 billion ($1.5-$3.8 billion), partly through additional cuts in management and business units closely linked to the already downsized divisions.
HSBC’s London-listed shares have risen by 11.5% year-to-date, building on a 20% surge in 2024. Investors also view the bank’s shift from aggressive expansion to profitability as a means to close the valuation gap with U.S. competitors.
“Many American banks with similar return profiles are trading at much higher price-to-book multiples,” said Sajeer Ahmed, global equities portfolio manager at HSBC investor Aegon Asset Management.
For instance, HSBC posted a return on tangible equity (ROTE) of 19.3% in the first nine months of 2024 but traded at a price-to-book multiple of 1.04—far below Morgan Stanley’s 2.16 multiple despite its slightly lower 18.8% ROTE last year.
“Elhedery’s shift in strategy aims to close this valuation disparity over time,” Ahmed added.
A bank forecast indicates analysts expect HSBC’s full-year profit to reach $31.6 billion, remaining stable after a substantial 78% jump to $30.3 billion in 2023.
Internal Tensions and Challenges Ahead
Despite investor approval, Elhedery faces internal resistance as the restructuring unfolds. Analysts warn that job cuts in investment banking could create instability, especially if global market activity surges in 2025 under Trump-era deregulation.
Staff affected by the restructuring fear further downsizing, creating uncertainty among employees in related divisions, sources at HSBC revealed.
Meanwhile, HSBC’s wealth management operations in China face an uncertain future. The bank is reportedly considering scaling down its digital wealth project, Pinnacle, and its credit card business in China—moves that highlight the difficulties of expanding in the region.
Strategic growth consultant Alex Marshall believes HSBC’s Asian focus remains a strong bet.
“This isn’t about choosing between China and the West,” he said. “Asian capital flows present a massive growth opportunity, while Europe’s capital markets remain weak.”
With shareholders largely in favor of the shift, Elhedery’s challenge will be managing internal disruptions while ensuring HSBC remains competitive in a fast-evolving global financial landscape.
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