Weak economic growth, fiscal tightening, and intrusive regulation have created a challenging backdrop in Europe. Uncertainties over regulatory and legal changes remain key risks for financial institutions.
Yet long-term prospects for HSBC in Europe remain attractive, driven by the trends in trade flows and wealth creation which are traditional areas of strength for us. Europe will continue to contribute significantly to world trade growth. In 2020, six European countries will rank in the top 15 global importers and exporters.
Europe remains a key region for HSBC, contributing one-fifth of Group profits and also a deep pool of savings funding
Consequently, Europe remains a key region for HSBC, contributing one-fifth of Group profits and also a deep pool of savings funding as well as management talent.
Where is HSBC in the new European environment? We have a meaningful presence in many of the most attractive growth markets, strong capital generation, and a strong funding base. We have operations in countries covering 85 per cent of trade flows in Europe. As opposed to many of our competitors, we have both the capacity and the organic opportunities to invest.
Our European operations have made good progress in implementing Group strategy, streamlining businesses, focusing on cost efficiency and re-investing in growth opportunities.
We continue to simplify the business. Since 2011, in our European operations, 17 disposals or exits have been announced and about USD1.1 billion of annual sustainable cost savings have been delivered. We are focusing on priority markets in the UK, France, Turkey, Germany and Switzerland. In these countries, we have gained market share in important sectors. In France, Retail Banking and Wealth Management (RBWM) grew faster than the market between 2010 and 2012. In Germany, our share of Debt Capital Markets (DCM) doubled from 2010 to 2013.
Our results for 1Q 2013 were robust in a difficult environment. Reported profit before tax for Europe was USD1,795 million and reported return on risk-weighted assets was 2.4 per cent.
Looking forward, our priorities are clear. Commercial Banking (CMB) will drive revenue growth through the international network, grow revenues from collaboration and cross-referrals, and further expand coverage in faster-growing markets. Global Banking and Markets (GBM) is well positioned in products that will benefit from global trends: DCM, project and trade finance, payments and cash management, foreign exchange, and the internationalisation of the renminbi. RBWM will grow its core customer base in target markets, deepen customer relationships, accelerate digital distribution and selectively improve its geographic coverage. Global Private Banking (GPB) will focus particularly on onshore business, emphasise high-net worth customers, and capture growth opportunities through proactive collaboration with CMB and GBM.
For the next phase, from 2014 to 2016, our strategy remains unchanged: to grow the business; to implement the highest standards of conduct in line with our global commitments; to streamline processes; and to achieve sustainable additional savings that will fund future investment.
We are well placed in the new banking environment. We are focused on priority markets, well-funded, one of the best capitalised banks, gaining market share in key sectors, and have a proven track record in delivering change together with a clear plan for growth.
This article follows a presentation by Mr Robertson on HSBC’s strategy in Europe to an investor conference on 12 June 2013 in Brussels.
Download the full presentation.