HSBC Writes its own Obituary

Posted by Ed 11 mths ago
Global banking behemoth HSBC threw its full weight behind China’s imposition of security legislation on Hong Kong, arguing that the new law will help bring much-needed political stability and economic growth and development to the city.
The bank’s kowtowing to Beijing is the inevitable culmination of the UK-based lender’s multiyear Asian re-pivot, but it also risks attracting U.S. ire. And if recent history is any indication, that tends not to end happily for global lenders.

Keeping Beijing on your side is easier said than done when Beijing is engaged in an escalating trade war with Washington, to whom HSBC is also heavily indebted thanks to the deferred prosecution agreement it was gifted by the DOJ in 2012, after being found guilty of breaching sanctions and laundering money for Mexican drug cartels.

Last year, HSBC paid off part of that debt by ratting out Chinese telecoms giant Huawei to U.S. authorities for breaching U.S. sanctions on Iran. But in doing that, it infuriated Beijing, which threatened to place the bank on its black list of “unreliable entities,” which would have cut the lender off from its biggest market.

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Ed 11 mths ago
The Tragedy of HSBC
“A waiter, again unbidden, brought the chessboard and the current issue of The Times, with the page turned down at the chess problem.”
While America burns, the dollar tumbles, stock markets soar, Germany announces a massive bailout programme which dwarfs the pennies Italy desperately needs, the ECB gets ready for another money dump, and UK politicians grumble about queues… life goes on.
There is something deeply tragic about yesterday’s announcements from HSBC and Standard Chartered supporting the imposition of China’s Security Law in Hong Kong.
We can all act shocked and damn them for supping with the devil, but neither bank had any real choice but to make the unpalatable decision to support the unsupportable. Both know their futures depend too much on China’s patronage to survive without kow-towing.
Yesterday, they each wrote the first lines of the final few paragraphs of their own obituaries.
10-years ago I wrote in the Porridge why HSBC was my top bank stock. I said something along the lines of while other banks will remain vulnerable, HSBC had the franchise, strength and depth to survive and thrive.
Its dividend policy was strong and would provide dull, boring, predictable returns for the long-term. The Long-term is so over.
Read the comments following any article about the two Hong Kong banks this morning and are they full of earnest virtue signalling from angry clients who say they will close their accounts. I will probably switch mine.. but only because now there is zero chance the service will get any better.
Timing is everything. I laughed out loud at a post on Linked-In from HSBC claiming leadership in ESG matters and Green funding. Really… this is not the time for HSBC to be bragging about its ethical credentials.
The sad reality is HSBC has become a patron of the Chestnut Tree Café – the bar where the purged characters from 1984 spend their last few months in isolation, irrelevancy and waiting for the axe to fall. HSBC and Standard Chartered’ future is window dressing the new Hong Kong. HSBC has become as yesterday as Deutsche Bank.
It could have been so different.

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Ed 11 mths ago
Hot on the Heels of Announcing Support for the National Security Law, US Senators Take Aim at HSBC
A Senate Republican who’s sponsoring legislation to penalize banks that work with Chinese officials moving to crack down on dissent in Hong Kong said his bill would bring “unprecedented” action to the issue.
Senator Pat Toomey of Pennsylvania said his bill “penalizes the banks that choose to finance the erosion of Hong Kong’s autonomy and put marginal profits ahead of basic human rights.”
 Toomey introduced the bank sanctions legislation along with Democratic Senator Chris Van Hollen of Maryland.

“It’s very important that we deploy the full arsenal and tools at our disposal,” Van Hollen said. “It’s important that Congress move forward on this.”

Toomey said the measure would be “be an unprecedented action toward the Chinese Communist officials and it is intended to create obstacles to that aggression -- obstacles that the leadership in Beijing has not encountered before.”


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Ed 11 mths ago
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