HSBC plans biggest investment banking retrenchment in decades

By Sinead Cruise

LONDON (Reuters) -HSBC is to wind down its M&A and equities businesses in Europe, Britain and the Americas, it said on Tuesday, as it accelerated its shift to Asia in its biggest retrenchment from investment banking in decades.

"Our intention is to move to a more competitive, scalable, financing-led model," Michael Roberts, CEO HSBC Bank said in a memo sent to staff seen by Reuters, which said the lender would retain more focused M&A and Equity Capital Markets (ECM) capabilities in Asia and the Middle East.

A spokesperson for the bank, which employs around 220,000 people globally, confirmed the contents of the memo.

CEO Georges Elhedery, who replaced Noel Quinn in September, is overhauling Europe's largest bank to cut costs and improve accountability as well as to tighten its focus on Asia, where it earns the bulk of its profit.

Analysts at that time questioned what kind of savings Elhedery could achieve and which parts of the bank would be affected, given his predecessors' restructuring attempts and the bank's steadfast ambition to remain a global, full-service bank.

HSBC will keep its debt capital markets and leveraged acquisition finance operations globally, Roberts told staff in the memo, which acknowledged how "unsettling" the news would be for bankers who advise on dealmaking and corporate equity raising, such as through initial public offerings.

It was unclear precisely how many roles would be cut, or the likely savings, or how many bankers might be redeployed to other financing businesses where HSBC considers it is better able to compete with U.S. rivals who have dominated investment banking's most lucrative segments for years.

"I've lost count of the number of times HSBC has been in and out of ECM in the UK. It never seems to succeed," Shore Capital analyst Gary Greenwood told Reuters. 

"At the end of the day, these are expensive businesses to run and if you are not winning the business and generating the fees then it's easy to lose money."

HSBC shares were little changed after the news, down by 0.2% at 822 pence by 1146 GMT, valuing the bank at about 147 billion pounds ($182.9 billion).

Some commentators described the timing of HSBC's decision as surprising, given capital markets activity is expected to grow in the near term, fuelled by expectations of interest rate cuts and pro-growth policymaking across the West, in the wake of U.S. President Donald Trump's return to power.

"The bank is being run with medium to long-term view," RBC Capital Markets analyst Ben Toms told Reuters.

"Geographically, the move reflects the continued shift from West to East, where growth and profitability are higher."

HSBC's decision to shutter the businesses was earlier reported by Bloomberg.

($1 = 0.8037 pounds)

(Reporting by Sinead Cruise; Editing by Tommy Reggiori Wilkes, Elisa Martinuzzi and Louise Heavens)