HSBC HSBC Holdings PLC

By Margot Patrick 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (June 12, 2018).

LONDON -- The new chief executive of HSBC Holdings PLC said Monday the bank is in growth mode and plans to invest up to $17 billion in China and new technologies, but ruled out major acquisitions in the near future.

In his first strategy update since taking over from former CEO Stuart Gulliver in February, John Flint said the bank is on the right track but needs to pick up the pace on improving returns. He laid out a plan for the bank to make a return on tangible equity higher than 11% by 2020, lifting a previous target of 10%. In 2017, the return was 5.9%.

To get there, he said HSBC will invest more in Asia, including in China's Pearl River Delta region and the bank's wealth businesses, and in technology. Mr. Flint counted those as two among eight priorities, which also include turning around HSBC's U.S. business -- where there has long been a question mark over HSBC's lack of scale -- and getting more revenue from the bank's international network.

In all, HSBC will spend $15 billion to $17 billion between now and the end of 2020, much of it on digitization and improving processes, finance chief, Iain Mackay said. The plan relies on the bank's revenue outpacing cost growth each year, and keeping HSBC's dividend steady at its current level.

Mr. Flint said HSBC has grappled with whether to grow or shrink in the U.S., and sought outside help from consultants to assess the opportunities. Before the financial crisis, HSBC grew rapidly in the U.S. by purchasing a large subprime lending business, then spent billions of dollars shutting it down when losses rocketed.

"As an executive team we looked at this question probably twice a year for the last five years and scrubbed it different ways," Mr. Flint told journalists on a conference call. He said an acquisition in the U.S. would be expensive right now and that a "shrink to greatness" wouldn't work either.

Instead, HSBC will keep focusing on the international opportunities for its U.S. retail and corporate customers, Mr. Flint said, and is also moving back into unsecured lending to improve profits.

Monday's announcement fit with a theme of continuity under Mr. Flint. Under former CEO Mr. Gulliver, HSBC renewed its focus on Asia for future profits. But the bank also underwent a sweeping restructuring to adapt to changing regulatory and economic conditions, exiting more than 100 businesses and spending billions of dollars on improving its financial crime fighting systems.

"Having undergone a period of extraordinary restructuring, we're ready to start realizing the potential of this business," Mr. Flint said Monday.

Last month the new chief executive got off to a rocky start after the bank said costs spiked in the first quarter and a planned $2 billion share buyback fell short of analyst expectations.

Write to Margot Patrick at margot.patrick@wsj.com

(END) Dow Jones Newswires

June 12, 2018 02:47 ET (06:47 GMT)

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