Thursday 26 April 2018

HSBC in €255m plan to move 1,000 jobs to Paris after Brexit

HSBC chief Stuart Gulliver who is set to retire next year. Photo: Bloombeg
HSBC chief Stuart Gulliver who is set to retire next year. Photo: Bloombeg

Sumeet Chatterjee and Lawrence White

HSBC could spend up to $300m (€255m) moving jobs and parts of its business to Paris following Britain's exit from the EU, CEO Stuart Gulliver has said.

The estimate, one of the most detailed yet by a major bank, includes the costs of relocating up to 1,000 jobs to the French capital as well as associated legal fees, Gulliver said.

"The $200-$300m total is the cost of the transition to France," Gulliver said after HSBC reported an increase in profits for the first half of the year.

HSBC said up to $1bn in revenue could be at risk from Britain's exit from the EU but it should be able to preserve the income by shifting associated jobs to Paris, Gulliver said.

Companies are spending tens of millions with international banks establishing new subsidiaries in the bloc or developing existing ones. That's despite little clarity on how much business their UK outposts will be able to do in the EU once Britain leaves in March 2019.

HSBC Chairman Douglas Flint said a meeting he attended between Brexit minister David Davis and UK company executives this month showed signs of an improved relationship between the government and business over Brexit. "The meeting was evidence of that, it was a well-designed meeting with the right people in the room, and each side interested in understanding each other," he said.

Meanwhile, a third share buyback in a year underlined progress in the turnaround plan for Europe's biggest bank, with profit also growing by 5pc in the first half of 2017.

The news sent HSBC shares up 3pc to a four-year high of 764 pence each in London, as the bank signalled further buybacks and confidence that it can continue to improve revenues from growth in Asia.

Mr Gulliver and Mr Flint are both retiring, leaving a legacy of improving revenue and returning more capital to shareholders, having focused on trimming the bank's empire and shifting its focus eastwards.

The latest share buyback, of up to $2bn, comes as HSBC uses excess capital to offset the dilutive effect of shares paid out as dividends. It completed a previously announced $1bn buyback in April.

The buybacks and sustained dividends show HSBC further ahead in its turnaround than UK-based rivals including Barclays and Standard Chartered which have suspended payouts as they restructure. "The return of capital comes from the fact that the business is very accretive, very profitable ... the dividend is 51 cents for the foreseeable future," said finance director Iain Mackay.

HSBC said its common equity tier 1 ratio - a measure of financial strength - was 14.7pc at the end of June, the highest among major European banks. The ratio is set to increase as the bank repatriates about $8bn stuck at its US subsidiary, following approval from the Federal Reserve, potentially enabling further buybacks.

The buyback will take the total since the second half of 2016 to $5.5bn. HSBC's dividends totalled $10.1bn in 2016, $10bn in 2015 and $9.6bn in 2014.

For the half-year through June, pre-tax profit rose to $10.2bn from $9.7bn in the same period a year earlier, a result that compared with the $9.5bn average estimate drawn from analysts polled by the bank. Gulliver said he could be at HSBC as late as December 2018 if an external candidate is appointed by incoming chairman Mark Tucker.

Reuters

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