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«Why bother with a global franchise if it only adds $1.2 billion to profits?,» asks one U.K.-based CEO at a Swiss bank. «The regulatory risks and additional capital at risk are simply not worth it,» agrees one family office investor who nonetheless favors HSBC stock because of its high and consistent dividend yield.

«Surely HSBC can make find a way to make at least as much money from its international bank as it can from 7.4 million people in Hong Kong?» he asks. Apparently not – full year results for 2018 showed HSBC earned close to $2,400 per Hong Konger per year in fees. In comparison, J.P. Morgan made close to $300 per client in its largest market, the U.S.

Partner Up?

For any business to be so lopsided – where costs are spread across an international franchise but revenues are concentrated in one geography – is a questionable model. «It is a fundamental strategic failure,» says the family office investor. «It is certainly not reflective of the bank’s true potential,» agrees the CEO.

Both agree it dims the prospects of the bank to remain relevant globally over the long term. A white knight could help bring some balance to the bank’s numbers but it would have to be a lead player in its home market to make a real difference.

Uphill Task

It will be an uphill task to convince regulators in the U.K. or the U.S to accept the concentration risks that would result from such a deal but as the recent Deutsche Bank-Commerzbank talks have proved, it would not be impossible. Did someone say Barclays?