Top UK banks see Brexit and red tape as sources of new business

London — As Britain moves to sever its membership of the EU, two of its biggest banks, HSBC and Standard Chartered, are building up their operations in the bloc in a bid to win more business helping clients grappling with red tape and Brexit.

HSBC this month launched its “Europe means business” campaign aimed at building awareness of its capabilities in the region and prompting staff to pitch the Asia-focused bank's abilities to clients in other markets.

StanChart increased its staff in Frankfurt from 90 to 200 in the past 18 months, said corporate and institutional banking head Simon Cooper.

“Brexit was the catalyst for us to set up a local subsidiary in Europe ... but strategically it makes sense anyway,” said Cooper. StanChart plans to hire “tens more” in the German financial hub and in Paris.

Multiple hubs

The loss of some EU market access for British financial firms due to Brexit means many large companies that have traditionally run all their European finances from London now need a bank to help them operate between multiple hubs.

For HSBC and StanChart, which make more than two-thirds of their revenue in Asia and have seen Europe as less important, that means refocusing on the world's largest trading bloc.

Europe and the Americas contributed just 11% of StanChart revenue in 2018. Europe including its very large British business, contributed 30% for HSBC.

Both banks hope to lean on existing relationships in their strongholds in Asia, as well as a growing client base in other parts of the world to feed their European operations.

Their bids for more European business are aimed not so much at investment banking, such as advice on mergers, but the more day-to-day activities of trade finance and cash management known as “transaction banking”.

This is a lucrative business, with overall revenue for the Europe, Middle East and Africa region climbing to $10bn in 2018, from $9.5bn the previous year, figures from industry analytics firm Coalition show.

HSBC vies for a top three spot in competing for that pot with US rivals Citigroup and JP Morgan, while StanChart ranks between seventh and tenth, Coalition figures show.

Companies working in Europe are seeking guidance on dealing with changing EU regulations such as a new payment services directive which is set to transform banking by allowing customers to manage their finances through third-party providers.

On the flipside, StanChart is also targeting smaller corporates in EU countries that have significant business in its core markets of Asia, Africa and the Middle East, Cooper said.

“A quick analysis showed there are something like 1,000 companies in Germany that operate in three or more of our markets, we’re very under-penetrated among this European client base. So there's a real opportunity there,” he said.

For HSBC, the renewed focus on Europe is less about hiring new staff in its 12 continental EU markets than galvanising them to work more closely together, said James Emmett, the bank’s CEO for the region.

“Our priority is to build the leading international bank in Europe, and we have a unique opportunity to do that because the franchise is already in place,” he said.

Emmett said that companies from countries including China and the US are increasingly seeking to work with a single bank in continental Europe to manage cash-flow, financing and other needs as Brexit looms.

“Chinese companies, for example, aren’t saying they’ll pull out of the UK into Europe, but they want us to help them manage between the two,” Emmett said.

Reuters