HSBC: investment banking downsized

(CercleFinance.com) - HSBC announced on Wednesday its intention to reduce its M&A and equity capital markets activities in the UK, Europe and the USA.


In a brief statement sent to the press, the banking group explains that this decision, which is conditional on compliance with local legal requirements, is part of its efforts to simplify its organization and increase its leadership in high value-added businesses.

With this in mind, the bank plans to retain 'more focused' M&A and equity capital markets capabilities in Asia and the Middle East.

In investment banking jargon, equity capital markets cover corporate equity financing via IPOs, capital increases or convertible bond issues.

According to observers, this decision shows that HSBC is now seeking to be more pragmatic.

"I don't think this decision reflects the need to make a choice between activities in China or those in Western countries", comments Alex Marshall, consultant with strategy consultancy CIL.

I think it's more a response to the brutality of the commercial data", he stresses.

"HSBC has a dominant position in equity markets within the Middle East and North Africa (MENA) region, but the Group is finding it difficult to occupy the same status in the USA, for example", adds the consultant.

Alex Marshall also points to HSBC's long-standing loss of momentum in M&A advisory services.

This is a particularly competitive market, with depressed transaction volumes in Europe in recent years, which means that this region may no longer be a priority," he continues.

"The reality on the financial markets offers us another interesting piece of information; the Asian capital markets are experiencing significant growth and HSBC is well positioned to benefit from this boom", concludes Alex Marshall.

Investors seemed to see the glass of water as half full this morning, as HSBC shares rose by 0.2% on the London Stock Exchange.

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