HSBC’s new Hong Kong leadership intent of mending ties with Beijing
Bank executives say they are finding it increasingly hard to keep focused on business and steer clear of politics
Hong Kong/Shanghai — The two bronze lion statues standing guard over HSBC’s main offices in Hong Kong still bear the marks of an attack by protesters, who last week daubed them with red and black paint, setting at least one ablaze. Graffiti declared that HSBC had been dyed the red of China.
HSBC has vowed to restore the iconic lions to their former glory. But the Asia-focused lender may not find it so easy to disentangle itself from deepening tensions in its biggest market at a time when its new leadership must also repair a relationship with Beijing that’s been weakened by the Huawei probe.
The bank became the target of the public’s ire in Hong Kong after the police arrested four people linked to a group that helps pro-democracy protesters pay legal fees. HSBC had closed an account used by the group in November.
Bank executives are finding it increasingly hard to keep focused on business and steer clear of politics, said a senior executive in Asia, who asked not to be named discussing internal matters. Political tension on the streets is also causing rifts among HSBC staff. Younger local employees in the Hong Kong office tend to be supportive of the pro-democracy movement, while those with business and personal ties to the mainland are more neutral or pro-Beijing, staff interviewed by Bloomberg said, asking not to be named speaking on a sensitive issue.
With two-thirds of its profit at stake, the London-based firm has previously been able to stay away from controversy as political tensions roiled Hong Kong and dragged in peers including JPMorgan Chase and Citigroup. Chinese retailers and branches of lenders such as Bank of China have been targeted, while Cathay Pacific Airways and the National Basketball Association came under pressure from Beijing after employees supported the demonstrations.
HSBC has said its decision to close the protest-linked account was unrelated to the police action. It’s condemned acts of vandalism against its property as “unjustified” and promised to restore the defaced lions, which it said “form part of the bank’s and Hong Kong’s history.”
The decision was made after finding unusual transactions, people familiar with the matter said, adding that the bank risked being punished by regulators for any negligence. They asked not to be identified because the matter is private.
“HSBC is now joining Cathay Pacific in discovering that politics and business can’t always be easily reconciled,” said Brock Silvers, managing director at Adamas Asset Management in Hong Kong. The pro-democracy protests are “doubly negative” in that they “detract from the local market while simultaneously complicating the Chinese market,” he said.
A spokesperson for HSBC did not comment beyond the statements released by the bank when contacted by Bloomberg.
Navigating the politics of the protests is one of several challenges facing interim CEO Noel Quinn, who is also dealing with the fallout from HSBC’s assistance with a US probe into Huawei and the wider impact of the US-China trade war.
HSBC was singled out for contributing to the arrest of Huawei’s CFO Meng Wanzhou on charges of violating US sanctions on Iran and Syria. The bank has made the case that it had no choice but to help the US department of justice probe. The formal hearings for Meng’s extradition to the US begin on January 20 in Vancouver.
The bank is working to improve relations with China, launching a public-relations offensive aimed at leaders in Beijing after missing out on several business licenses.
Hong Kong and China together contributed two thirds of HSBC’s adjusted pretax profit in the first three quarters in 2019. The group has $1.1-trillion worth of assets across Asia, according to its interim report last year, with a majority concentrated in Hong Kong.
Born as the Hongkong and Shanghai Banking Corp in 1865, HSBC has been shifting more resources to Asia, especially China, since 2015 as part of a strategy initiated by Stuart Gulliver and strengthened under the leadership of John Flint, who was ousted in August. Acting chief Quinn will make his pitch to keep the top job in February as the bank undertakes its biggest overhaul in years.
The lender has warned of write-offs, plans to pare back underperforming businesses, and people familiar with the matter have said it will try to sell its French retail bank.
It is the Asian operations that offer the greatest promise and, now, some of the biggest challenges.
Hong Kong is HSBC’s single biggest market with 21,000 employees. In China, it has ramped up its investment across financial sectors including commercial banking, credit cards, investment banking and wealth management. The bank now employs more than 8,000 staff as the largest foreign bank in China, according to its website.
As the tension in the former British colony shows little sign of abating, campaigns against the Chinese firms have now expanded to include HSBC. Some protesters have linked the account closure to the police arrests for suspected money laundering, taking to online forums and rallies claiming HSBC has betrayed the Hong Kong people. Bank’s branches and ATMs have been vandalised in areas including Wan Chai and Mong Kok.
One employee who regularly donates to groups that support the protests said she was sad after the lions were vandalised because they are seen as spiritual leaders and HSBC was innocent in this case. She said she won’t turn against the protesters, but feared that some of her colleagues would change their mind.
Stephen and Stitt, the two lions, have been covered by hoardings. The sign on front promised: “They will return.”