HSBC has appointed advisers to spur the final phase of its private banking restructuring, after its Swiss unit came under heavy fire earlier this year for helping rich customers dodge taxes.
Europe’s biggest bank has appointed Rothschild to help manage the restructure, which involves selling portfolios of riskier clients and shrinking its global footprint, said people familiar with the process.
The move to reduce the private bank comes after Stuart Gulliver, chief executive of HSBC, unveiled plans in the summer to help simplify the global group and focus on core markets, including Asia.
KPMG is also working with HSBC to help it retrench and cut the geographical scope of the private banking unit, to match the scale of the retail and corporate divisions, one source said.
As part of Mr Gulliver’s broader strategy, HSBC is shrinking the investment bank and commercial division, has sold its lossmaking Brazil operations and is attempting to exit from its Turkish business.
“Gulliver has a sword of Damocles over his head,” said one person familiar with the planned divestment, referring to the US deferred prosecution agreement imposed on the bank over sanctions and money-laundering offences. “He has too many risks to manage. Getting out of high-end banking would help ease his load.”
Although HSBC’s private bank is profitable — with profit before tax of $261m in the first nine months of this year, down from $554m the year before — it has been plagued by high-profile conduct issues and it now falls outside of the bank’s core strategy.
HSBC came under scrutiny at the start of the year after its Swiss private banking arm was exposed as having run accounts for tax-dodging clients.
Secret files on HSBC were leaked to news organisations, alleging that its private bank provided large, untraceable cash bundles in foreign currencies to customers, and colluded with them to conceal accounts from tax authorities.
HSBC has already started to shrink its global private banking division. It announced in October an agreement to sell its Bermuda private banking and trust operations, as part of unwinding the $1.3bn acquisition of the Bank of Bermuda in 2003.
It sold $12.5bn of Swiss private banking assets last year to Liechtenstein’s LGT Group, cutting the number of countries in which it has customers from more than 150 to about 70.
Mr Gulliver has come under mounting pressure to deliver on cost cuts. The bank has suffered a drop in revenue every year since he took over as HSBC chief executive in 2011.
The chief executive promised in June to cut another $5bn of costs by 2017, as part of a new “pivot to Asia” strategy aimed at cutting its underperforming business units in Europe and the Americas.
The bank is also undertaking a review of its domicile, scrutinising whether to move its headquarters out of the UK.
Hong Kong — HSBC’s home before 1992 — has long been assumed the bank’s first choice of domicile. However, more recent conversations within the bank have centred on the US as a viable alternative.