By Max Colchester and Margot Patrick
LONDON-- HSBC Holdings PLC's management will make a decision on
whether to quit the U.K. by the end of the year, the bank's chief
executive said on Tuesday.
The lender, which makes the vast majority of its profit outside
the U.K., said that it is reviewing whether to move its
headquarters away from London in the face of increased taxation and
restrictions on the size of the bonuses it can pay its employees.
HSBC Chief Executive Stuart Gulliver said that the executive
committee would report back to the bank's board by the end of the
year. If the board validates the move, then an extraordinary
general meeting would have to be held.
"This isn't meant to be a threat, this is just very objectively
looking at a few facts," Mr. Gulliver said on a call with
reporters.
The tussle over HSBC's domicile comes as the Asia-focused bank
weighs a wider restructuring. On Tuesday the bank said that net
profit inched up 1% in the first three months of the year to $5.3
billion, bolstered by a strong performance at its markets business.
However high costs continue to dog the bank. Adjusted operating
expenses rose 6% on the back of higher staff and compliance
spending.
The bank is set to present a refined strategy on June 9, which
analysts expect will lead to the bank shrinking further. On
Tuesday, Mr. Gulliver reiterated that businesses in the U.S.,
Mexico, Brazil and Turkey made returns that were
"unacceptable."
However he played down rumors that the bank would exit large
parts of its U.S. franchise saying that investors should "expect a
restructuring story." Following a series of ill-judged
acquisitions, HSBC has had to swallow huge write-downs in the
region, prompting some investors to questions whether it should
quit the U.S. altogether. On Tuesday, Mr. Gulliver played down
those fears saying that the bank still relies on its U.S. units to
provide dollar funding and access to big U.S. corporates that do
business around the world.
The future is less certain for the bank's Brazilian and Turkish
businesses. HSBC has begun sounding out prospective buyers for the
two units, according to people familiar with the matter. On
Tuesday, Mr. Gulliver declined to comment on whether the bank would
quit those two countries.
The long-term future is also hazy for HSBC's U.K. unit. The bank
is awaiting more detail on the U.K.'s "ring fencing" rules--which
will see lenders' retail businesses segregated from their
investment-bank operation--before deciding what to do with the
unit. These rules, which don't come into action until 2019, will
force the U.K. retail unit to have its own independent board and
management. HSBC fears having a large investment in a unit it
couldn't control, Mr. Gulliver said. But he added that it was "way
too early" to decide whether to spin off the U.K. unit as the rules
hadn't yet been finalized.
Write to Max Colchester at max.colchester@wsj.com and Margot
Patrick at margot.patrick@wsj.com
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