HSBC will exit mass market retail banking business in the US, closing most of its branches and repurposing others towards international banking and wealth management clients. It will also retain its US international wholesale banking franchise, according to a statement on the lender's website.
Europe’s largest lender by assets has entered into sales agreements for certain parts of its US business with Citizens Bank and Cathay Bank. These transactions are pending regulatory approval and are expected to close by the first quarter of 2022, HSBC said.
It expects to incur $100 million of pre-tax costs in connection with these transactions.
“They are good businesses, but we lacked the scale to compete,” Noel Quinn, group chief executive of HSBC, said.
“Our continued presence in the US is key to our international network and an important contributor to our growth plans. This next chapter of HSBC’s presence in the US will see the team focus on our competitive strengths, connecting our global wholesale and wealth management clients to other markets around the world.”
Lenders globally are benefiting from improved operating conditions as businesses stabilise and economies around the world shake off the pandemic-driven slowdown. The International Monetary Fund upgraded its global economic forecast in April on a better-than-expected recovery in some developed economies. The global economy is now forecast to expand 6 per cent in 2021 after tipping into its worst recession since the 1930s last year.
HSBC will exit 90 branches out of its current US network of 148 and retain a small network of physical locations in existing markets, which will be repurposed into 25 international wealth centres to serve high-net-worth customers. The remaining branches, numbering between 35 and 40, will be shut down, according to the website.
The lender also said it will exit from personal, advance and certain premier banking customers (those with balances below $75,000) as well as retail business banking customers (small businesses with a turnover of $5m and below).
“Today’s announcement is an important step towards becoming a more focused, simpler and sustainably profitable organisation,” Michael Roberts, chief executive, US and Americas at HSBC, said.
Citizens Bank has agreed to acquire HSBC’s 80 East Coast branches as well as its online bank portfolio, including about 800,000 customers with $9.2 billion in deposits and $2.2bn of outstanding loans as at March 31, 2021. Some 80 per cent of these are home loans, Citizens Bank said.
The 80 branch purchases includes 66 in New York, nine in Washington DC and five in Florida. The branches will operate as HSBC branches until closing and will be rebranded as Citizens branches upon closing of the transaction, which is expected to be in the first quarter of next year, the US bank said in a statement on its website.
“With a sizeable customer base and a solid deposit franchise, this acquisition will serve as a springboard for our consumer national expansion strategy," Bruce Van Saun, chairman and chief executive of Citizens Bank, said.
Meanwhile, Cathay Bank has agreed to purchase HSBC’s 10 West Coast branches, including about 50,000 customers with $1bn in deposits and $800m of outstanding loans as at March 31, 2021. All of the branches being acquired are in California, Cathay Bank said. Financial terms were not disclosed, but Cathay Bank said it expects the deal to have a positive impact on earnings next year, following the deal's closure in the first quarter.
HSBC announced earlier this year that it was exploring strategic options with respect to its US retail franchise, including organic and inorganic options to improve its profitability.