Banks from HSBC to Citi shrug off China risks, embrace Hong Kong

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Pedestrians cross the road outside HSBC Main Building in Hong Kong on August 2, 2021. (Photo by ISAAC LAWRENCE / AFP) (Photo by ISAAC LAWRENCE/AFP via Getty Images)
Growing geopolitical tensions and pulled initial public offerings have done little to dampen the appetite of Western banks for Hong Kong and China. (PHOTO: ISAAC LAWRENCE/AFP via Getty Images)

By Ambereen Choudhury and Harry Wilson

(Bloomberg) — Growing geopolitical tensions and pulled initial public offerings have done little to dampen the appetite of Western banks for Hong Kong and China.

Standard Chartered Plc’s Bill Winters was the latest executive in recent weeks to signal a sweeping Chinese government crackdown and rising geopolitical tensions between China and the U.S. won’t derail his lender’s focus and investment in the region.

“We don’t see a structural or fundamental change in terms of the business opportunities for Standard Chartered,” Chief Executive Officer Winters said on a call with reporters Tuesday. Hong Kong’s continuing role as a conduit into Greater Bay Area mean “the opportunities for us in corporate banking and wealth management will be very, very substantial.”

His comments echo that of other firms such as Citigroup Inc., HSBC Holdings Plc and Credit Suisse Group AG who all used earnings to underline it is business as usual in the Greater China region. That comes despite a wide-ranging crackdown by Beijing on industries from its booming education industry to the tech sector last month as Xi Jinping’s Communist Party tightens its grip on the world’s second-largest economy.

The U.S. Securities and Exchange Commission has halted initial public offerings of Chinese companies in response.

International banks have long been bullish on Greater China. Hong Kong has provided growth to international banks as some forms of revenue from their home countries were shaken by the pandemic, while China is viewed by firms as a lucrative area for growth in wealth management.

Strongest Region

It’s easy to see why. At Standard Chartered, Asia was the bank’s strongest region in the second quarter, with profit up 75% to US$1.01 billion, countering declines in Europe and the Americas. HSBC, which is moving several of its most senior executives to Asia, said Monday that risk-weighted assets in the region increased by 6% from the start of the year

“We’re investing heavily in the market and investing heavily in China and the rest of the region,” said HSBC Chief Financial Officer Ewen Stevenson on a Bloomberg Television interview. “We’re very confident about the long-term macro trends in Hong Kong and the rest of Asia.”

Citigroup’s chief financial officer said last week that China’s recent moves to crack down on companies isn’t likely to harm the bank’s business across the Asia-Pacific region. Credit Suisse CEO Thomas Gottstein said that while recent events contribute to “a less predictable short-term situation,” the firm sees “very strong and robust economic development not only in China, but in Asia, that we consider to be very attractive for our business models.”

China’s crackdown has even boosted business in the region. HSBC said Monday that the local capital markets had been given a boost by a shift in business from the U.S. amid a crackdown on Chinese listings there.

The bank also said about a quarter of a US$35 billion year-on-year increase in customer lending at its wealth and personal banking unit related to short-term loans in Hong Kong was linked to initial public offerings, where clients borrow money to fund their purchase of shares in the latest listings.

“Hong Kong is the place to be if you want to participate in the Chinese capital markets,” Winters said in a Bloomberg Television interview Tuesday. “This is the hub of the Chinese capital markets and I don’t think there’s going to be any change anytime soon.”

© 2021 Bloomberg L.P.

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