HSBC Planning To Shift Elsewhere

HSBC (NYSE:HBC) is said to be in the process of shifting its headquarters from UK, after the bank said that the new costly capital rules are leaving it no choice.

However, many people are not certain that the bank will be making such a bold move, with an earlier threat leading nowhere. This time around the warning seems to be serious and is because of extremely challenging conditions that the bank is facing.

The bank reported a larger than expected fall in the financial institution’s profits and also forecasted extremely challenging conditions in the near future. The new U.K. regulations are projected to increase operational costs by $2.5 billion annually, which according to the statement released by the bank on Wednesday are too high. It was also mentioned that the bank would consider the option of moving back to Hong Kong or somewhere else till 2013.

The bank’s profits came from its corporate clients, however the bank’s investment unit rates and credit fell. The bank’s mortgage foreclosure drove its losses further.

The shares of HSBC fell by more than 5 percent after the announcements. The bank also announced that its underlying pretax profit fell by around 36 percent to $3 bullion, for the quarter ended September.

Stuart Gulliver, the Chief Executive Officer of HSBC is aiming to reduce annual operational costs by $3.5 billion and also to increase the bank’s focus on Asia. This has pushed Gulliver to quit countries where the bank does not have a significant presence and also announce numerous job cuts.

The bank also said that its loan impairment expenses were up by $700 million higher than in 2010. This was possible through an increase in the provision of the bank’s mortgage portfolio in United States and Canada, which was linked to numerous moratoriums on foreclosures.

The warning to shift headquarters was aimed at British politicians who are in the process of passing tougher regulations. These increased costs will lead to the bank shifting its base to either Hong Kong, its headquarters for more than 20 years or to some other country.

According to Gulliver, the decision to shift the headquarters will not be taken at the upcoming board meeting, rubbishing rumors. He said that the decision will be taken in the next 12 to 18 months. He also assured that the bank’s retail division will continue to stay in UK and only its holding company will be moved abroad.

Post Written By: Ed Liston Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing in his yacht.