HSBC Investors Support Investment Bank Cuts in the Face of Changing Market Demands

Investors in HSBC have supported CEO George Elhedery’s investment bank downsizing as the company turns its attention to Asia in the face of market and geopolitical pressure.

Despite Trump-era deregulation boosting expectations for capital markets development, HSBC investors are supporting CEO George Elhedery’s decision to reduce investment banking activities in the US and Europe, which is consistent with the bank’s plan to concentrate on its stronger Asian markets.

Two of HSBC’s 20 biggest shareholders were among the four shareholders who stated that the bank’s decision to close its mergers and equity capital markets teams in the Americas and Europe last month was in line with its plan to bolster its core business in Asia.

HSBC, formerly a huge banking conglomerate with operations in more than 100 nations, has been reducing its global footprint over the past ten years by eliminating low-return ventures.

According to investors, growing US trade tariffs are forcing CEO George Elhedery to allocate funds to Asian nations with thriving regional trade, possibly protecting HSBC from worldwide upheavals.

As a top 30 investor and investment director for European stocks at HSBC, Alex Potter stated, “Geopolitics are making life more difficult for lots of businesses that operate globally.”

“There are very few foreign banks that have a significant market share in US equity investment banking, despite numerous acquisitions over decades.”

Elhedery is anticipated to provide further information on his restructuring plan, including anticipated cost savings, when HSBC releases its full-year results on February 21.

Between £1.2 billion and £3 billion ($1.5 billion to $3.8 billion) in savings might be made, according to a bank insider, in part by further cutting executive positions and related departments. HSBC chose to remain silent.

After rising 20% in 2024, HSBC’s London-listed shares have increased 11.5% so far this year despite the reorganization.

In order to guarantee a sustainable return on tangible equity (ROTE) of about 16%, Sajeer Ahmed, global equities portfolio manager at HSBC investor Aegon Asset Management, thinks the bank is looking closely at its operations.

“The price-to-book multiple of many US banks with comparable return profiles is much higher,” Ahmed stated.

On Friday, HSBC, which reported a 19.3% ROTE for the first nine months of 2024, traded at a multiple of 1.04, which is less than half of Morgan Stanley‘s 2.16 multiple. Morgan Stanley delivered a slightly lower ROTE of 18.8% last year.

According to Ahmed, Elhedery’s abrupt shift from empire development to profitability is an effort to address the valuation gap over time.

After a 78% year-over-year increase, analysts predict HSBC will make $31.6 billion for the full year, which is not much different from the $30.3 billion it made in 2023.

Elhedery has its own internal problems. As 2025 goes on, the loss of important dealmakers and IPO consultants may become harder to defend, particularly if market conditions are favorable for a recovery.

Trump-fueled deregulation and mergers this year are projected to drive “double-digit growth” for these teams, according to Amrit Shahani, a partner at consulting firm BCG Expand.

Employees in related departments expect future layoffs, while impacted employees are concerned about their job security as a result of the restructure, according to two bank sources.

Nonetheless, other analysts contend that HSBC’s change in strategy is less about picking between the Chinese and Western markets and more about grabbing long-term prospects in Asia.

Alex Marshall, managing partner at strategic growth consultant, stated, “I don’t think this is about having to make a difficult choice between serving Europe and China.” The expansion of Asian capital is noteworthy.

“HSBC has done well out of this enormous award. On the other hand, Europe’s portion in global capital flows is rather weak.