#182 HSBC is adapting to global change

In February 2024, HSBC, the largest bank in Europe, declared its intention to sell its Armenian subsidiary, signaling the end of its nearly three-decade-long operations in Armenia. This move is notable considering the subsidiary’s robust performance by local standards, boasting $720 million in total assets and customer deposits amounting to approximately $500 million. Furthermore, HSBC Armenia’s net profit experienced a significant increase, climbing from $20 million in 2022 to over $27 million in 2023. This decision aligns with a broader corporate strategy shift initiated by the bank’s new management in 2020, aiming to optimize its global footprint. HSBC’s strategy involves reallocating capital from operations deemed less strategic or with low connectivity to ventures with higher growth potential worldwide. 

This strategy saw HSBC withdrawing from the United States in May 2021, with Citizens Bank acquiring 80 of its branches in April 2022. Further, in May 2023, Reuters reported that HSBC was considering exiting as many as twelve countries, after announcing plans to sell all or part of its businesses in France, Canada, and Russia. HSBC completed the sale of its French retail banking sector to CCF on January 1, just after Canada approved the Royal Bank of Canada’s acquisition of HSBC’s operations in Canada. Then, in February 2024, as HSBC was leaving Armenia, it also declared plans to pull out of Turkey, Greece, and Oman.

HSBC’s global expansion strategy originally aimed at establishing a significant presence in 81 countries by 2002, branding itself as “The world’s local bank.” This expansion involved notable acquisitions and the establishment of operations across Europe, Asia, the Americas, and the Middle East, emphasizing its ambition to be a global banking leader. 

However, substantial global economic shifts over the last two decades necessitated a strategic overhaul. With the global GDP ballooning from $33.84 trillion in 2000 to $96.51 trillion by 2021, HSBC faced heightened competition in numerous local markets, compelling tailored responses. Technological progress, notably the rise of digital platforms and wallets, has linked businesses and consumers directly, sidestepping traditional banking channels and introducing new competitive forces. The pandemic further catalyzed this trend, driving a shift towards online work, shopping, recreation, and education—challenges HSBC had to navigate. Additionally, a shift in global economic power, especially towards Asia, has transformed China and other Asian nations from manufacturing centers into significant consumer markets. This shift has propelled Asia’s GDP share to over 54%, outstripping the combined total of Europe and North America, which stands at approximately 33%. This realignment has drawn HSBC’s attention towards focusing its limited resources on Asian markets.

As of the current date, HSBC’s operations span 62 countries and territories, reflecting the bank’s strategic adjustments to concentrate on markets that align with its customer base and the dynamics of international trade and capital flows. This strategic recalibration underscores HSBC’s effort to maintain a balanced global presence while focusing on regions where it possesses competitive advantages, particularly in Asia and other key markets pivotal to global commerce.

This case highlights the essential practice of regularly updating long-term strategies to navigate global challenges and sustain competitiveness. HSBC’s adaptation to significant economic and technological shifts demonstrates the importance of strategic flexibility in a rapidly evolving world.

(Case written by Prof. Agassy Manoukian, American University of Armenia)

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