On his first trip to Canada since becoming chief executive officer of HSBC Holdings PLC, Stuart Gulliver wants to make one thing clear: He does not intend to shrink, much less sell, the Canadian business.
There has been speculation among analysts and rival bankers. Rumours have swirled as Mr. Gulliver, who took the reins in January at HSBC, the world's third-largest bank by assets, embarks on a program he hopes will position it for decades to come.
It involves slashing between $2.5-billion (U.S.) and $3.5-billion of costs in the next three years, paring back HSBC's massive global retail banking network, and concentrating more and more on emerging markets.
Mr. Gulliver and his team have been ruthlessly combing through operations in 87 countries, deciding what stays and what goes. He has already put the U.S. credit card business on the auction block and begun to exit the retail banking business in Russia. HSBC is making headlines over plans to axe nearly 700 jobs in France and a further 700 in Britain. Critics note that the latter move, in the London-based bank's home market, will save roughly £9-million ($13.8-million Canadian), about the same amount as Mr. Gulliver's bonus.
Mr. Gulliver, 52, is capable of rolling with the punches as he takes the steps he believes are necessary to build "the leading international bank." And as he wades through the vast operations of the company where he has worked for 31 years, he says he already knows one thing for certain: The Canadian unit, which is the seventh-largest bank in this country, is here to stay. In fact, he wants to retool the company's U.S. business so that it looks more like the one north of the border.
There are a number of reasons why the Canadian operations appeal to Mr. Gulliver, but a key one is the country's economic strength. A research report by HSBC economists forecasts that Canada will be the 10th largest economy in the world in 2050, while 19 of the 30 largest economies will be what are now considered emerging markets.
Meanwhile, "Canada is double leverage to the emerging markets," Mr. Gulliver said during an interview in the bank's Toronto offices. "It both supplies the emerging markets with commodities, but also the emerging market supplies Canada with its immigrant population. … In many ways you can almost bracket Canada with emerging markets in the analysis that we do as a bank. So, to be crystal clear, it's not for sale."
The Canadian unit currently earns nearly $1-billion (U.S.) annually before tax, and Mr. Gulliver intends to give it further capital to enable it grow, especially in Ontario and Quebec. Its Canadian business is skewed toward the West, while more than 60 per cent of the companies here that are involved in international business are based in Ontario and Quebec, HSBC Bank Canada chief executive officer Lindsay Gordon said. "We are in the process of trying to build up that capability," he noted.
Mr. Gulliver also sees the potential for HSBC to build a significantly bigger wholesale banking business in Canada, and this is one of 18 countries in which the bank plans to build up its wealth management business. But it will stick predominantly to its "sweet spot," Asian Canadians, Mr. Gordon suggested. "We're not trying to take on TD or RBC in the mass market, we're focused on the internationally-minded mass affluent," he said.
South of the border, J.P. Morgan is advising HSBC on the potential sale of its U.S. card business, whose assets top $30-billion. "We have received a number of bids," Mr. Gulliver said. If HSBC decides to proceed with a sale, he expects that the deal will close by the first quarter of 2012.
In another move designed to learn from the Canadian operations, HSBC is tasking the head of its commercial banking business here with overseeing a transition of the U.S. business.
As Mr. Gulliver forges ahead with the global retooling strategy, he won't say what portion of the business he expects will come from emerging markets in the future. "Emerging markets, directly or indirectly, will be the alpha driver of our share price performance and our profitability," he said. But he intends to have a strong presence in Europe, Canada and Australia, he added.