FinanceAsia asked what was previously considered an unthinkable question: has HSBC become just too big, and would shareholders benefit if it were broken up? With the stock trading largely sideways, a number of research analysts have explored this issue, and Credit Suisse recently put out a major research paper on the subject.
Indeed, as a former management consultant, couldnÆt Green see merit in such a move, provided it unlocked value for shareholders? ôPersonally I can see no good reason for a break up,ö said Green. ôWe benefit from economies of scale from our size, in areas such as IT, and we have a manifest opportunity to develop our businesses and their connectivity.ö
He added: ôFor example, we reckon there are 200 million individuals who want banking services in more than one country. We already have a small percentage of this market and we want to grow it. It is about giving those customers seamless services across countries. It is not easy; it requires scale such as we have and systems and must be well managed. Another area is corporate banking. We have 2.6 million commercial banking customers. Those corporate customers are looking for an ever more connected-up service.ö
Green did not dismiss the talk of a break-up out of hand, however: ôItÆs our job as management to demonstrate that the whole [of HSBC] is greater than the sum of the parts. I fully recognise we have work to do to demonstrate that, and as a former management consultant I know there are areas where we can do a better job of joining up the various parts of the bank to enhance returns. But I think we have a wonderful formula.ö
He also gave short-shrift to the idea that former HSBC Asia boss, Mike Smith, left because he wanted to spin-off the Asian operations into a separately listed company. He said the rumours of the Asian operations being spun-off were ôgroundlessö and ônonsenseö. Why would we, he asserted, ôAsia is the heartland of HSBCÆs businessö.
Asked whether HSBC was contemplating a listing in Shanghai, Green responded that it was not yet possible for foreign companies to list there. However, he said he believed this would change in time, and that ôit was natural for HSBC to think about this possibility when it is permitted. It is plainly something we will be interested inö.
In fact, he spoke enthusiastically about the growth of HSBCÆs China businesses. He had just flown in from Shanghai where it had been announced that HSBC has acquired 20 floors of Sun Hung KaiÆs new IFC development. HSBC will have naming rights over one of the two towers and will occupy a gross floor area of about 53,000 square metres.
FinanceAsia asked why HSBC was buying property for its headquarters in Shanghai, while selling its headquarters in London? Surely this strategy looked a little contradictory? Green answered that ôboth were good dealsö and that there was a strategic difference. HSBC wanted to secure room to expand in Shanghai, while he felt HSBC would take a more flexible approach to the firmÆs headcount at its Canary Wharf HQ.
As with every HSBC chairman before him, Green would not be drawn on the possibility of acquisitions in Asia, but did say his preference was for growth via organic investment. He noted that the bank had spent $2 billion globally to grow its personal banking business û on an organic basis û and with good results.
Finally, Green said he did not believe the worst was over in the US subprime lending market. But he said he was confident that HSBC had taken the appropriate steps to deal with its own exposures.
¬ Haymarket Media Limited. All rights reserved.
