HSBC to exit Bahraini retail banking business + unveils plan to cut costs

HSBC to sell its retail banking business in Bahrain: The lender will sell its Bahraini retail banking operations to the Bank of Bahrain and Kuwait (BBK), HSBC Bahrain said in a notice to customers. The move is pending the Central Bank of Bahrain’s approval and is expected to be completed in 4Q 2025. The lender didn’t disclose the value of the transaction.

The details: HSBC will transfer its retail loans, deposits, and accounts of some 76k customers to BBK. The sale doesn’t include the bank’s corporate and private banking businesses in the GCC nation.

Part of a wider restructuring agenda: The decision to sell comes as the lender continues a sweeping overhaul as it shifts its focus away from low-returning consumer banking activities. HSBC has also laid off 40 investment bankers in Hong Kong, following an earlier decision to shut down its M&As and equities businesses in Europe and the Americas, a source with knowledge of the matter told Reuters.

And a plan to cut costs: The lender “aims to generate approximately USD 300 mn of cost reductions in 2025, with a commitment to an annualised reduction of USD 1.5 bn in our cost base expected by the end of 2026,” it said in 2024 earnings (pdf). “To deliver these reductions, we plan to incur severance and other up-front costs of USD 1.8 bn over 2025 and 2026, which will be classified as notable items. We are focused on opportunities where we have a clear competitive advantage and accretive returns, and we aim to redeploy around USD 1.5 bn of additional costs from non-strategic activities into these areas, over the medium term.”

REMEMBER- HSBC’s restructuring drive began when Georges Elhedery took over as CEO in September. One of his first major moves as CEO was to reorganize HSBC’s global structure, grouping the lender’s Middle East, North Africa, and Turkey (MENAT) operations with Asia-Pacific operations under a newly formed Eastern Markets division. At the same time, Elhedery merged HSBC’s commercial banking business with its global banking and markets team, creating a new wholesale banking unit to streamline operations. The bank has also been doubling down on wealth and premier banking, particularly in the Middle East and Asia.

The lender reported a “strong 2024 performance,” with its income after tax coming at USD 25 bn, up USD 400 mn y-o-y and revenues stable at USD 65.9 bn. As for its financials for 4Q 2024 — the bank reported a net income of USD 600 mn, up USD 400 mn from the same period in 2023, reflecting the one-off USD 3 bn impairment charge related to its stake in Bank of Communications last year, according to its website. Revenues were down 11% y-o-y to USD 11.6 bn, primarily due to foreign currency losses from the sale of HSBC’s Argentina business.

Despite strong earnings, the overhaul has left some investors cautious. HSBC gained 1.38% on the Hong Kong Stock Exchange but fell some 0.21% on the LSE during yesterday’s trading. The restructuring-related expenses the lender is expected to incur are much more than initially anticipated, according to Citigroup analysts.

The big picture: “We are creating a simple, more agile, focused bank built on our core strengths. We continue to take deliberate and decisive steps … I have put in place a smaller, core team of exceptionally talented leaders driven by a growth orientated mindset and a firm focus on dynamically managing our costs and capital,” Elhedery said.

MARKETS THIS MORNING-

Asian markets are in the red in early trading this morning, Japan’s Nikkei is down 1.3%, the Shanghai Composite is down 0.2%, and so are the Hang Seng (-1.7%) and the Kospi (-0.6%).

THE CLOSING BELL: TADAWUL-

The TASI fell 0.1% yesterday on turnover of SAR 6 bn. The index is up 2.3% YTD.

In the green: EIC (+7.1%), Etihad Etisalat (+5.5%) and Zain KSA (+3.7%).

In the red: SAL Logistics (-7.9%), SFICO (-4.6%) and Nice One (-4.5%).

THE CLOSING BELL: NOMU-

The NomuC rose 0.2% yesterday on turnover of SAR 36.9 mn. The index is down 0.1% YTD.

In the green: Alrazi (+7.3%), Lamasat (+6.7%) and Sama Water (+5.3%).

In the red: TMC (-9.0%), Dar Almarkabah (-7.0%) and Almohafaza for Education (-6.2%).