HSBC is poised to take over Citigroup’s China-based consumer wealth management business, overseeing assets exceeding $3 billion, according to two informed sources. This significant development is expected to significantly enhance HSBC’s presence in China.
While the exact financial terms of the deal remain undisclosed at this time, the agreement will also involve HSBC absorbing “several hundred” of Citigroup’s employees based in China, as confirmed by one of the sources.
The announcement of this deal is anticipated to occur in the coming month, according to the two undisclosed sources who lack authorization to speak to the media.
Both HSBC and Citigroup have chosen not to provide comments on this matter.
This acquisition is another strategic move by HSBC to expand its footprint in China, a crucial market for the largest bank in Europe. HSBC has been committed to withdrawing from less profitable regions and concentrating its efforts on Asia, which remains a primary revenue source.
However, Western companies have become more cautious about conducting business in China due to increasing uncertainties. The challenging economic growth and the introduction of new national security regulations regarding data transfers have deterred many banks from expanding their presence in the country.
During a visit to Beijing in July, HSBC’s chairman, Mark Tucker, conveyed to Chinese officials that the historically resilient and cooperative approach taken by British businesses could serve as a bridge to address challenges and geopolitical tensions between the UK and China, as stated in a bank release.
HSBC, which currently offers wealth management and private banking services in the local market, recently achieved a milestone when it obtained a unique fund distribution qualification, the first of its kind granted to a foreign company. This accomplishment opens up new avenues for the bank in China’s vast 28.8 trillion yuan ($3.94 trillion) fund market.
HSBC is gearing up to begin selling funds to affluent Chinese clients by leveraging its insurance brokerage network, with plans to roll out this initiative as early as next month, according to a second source.
Citigroup, on the other hand, has been seeking to exit its China wealth management operations, which are part of its retail banking segment. These operations primarily serve wealthy clients in China, offering deposit, fund, and structured product services. However, its $3 billion in consumer assets under management pales in comparison to its Chinese and international counterparts, such as Standard Chartered, which have a more extensive network of retail branches dedicated to wealth management.
It’s worth noting that Citigroup’s private banking services, which cater to high net worth Chinese clients from the bank’s locations outside China, will remain unaffected. Additionally, Citigroup is in the process of seeking approval to establish a securities brokerage unit in China.
Citigroup’s strategic move to wind down its China retail banking business is part of its broader strategy to withdraw from consumer franchises in 14 markets across Asia, Europe, the Middle East, Africa, and Mexico. In Asia, the bank is in the process of closing its South Korea operation and transferring its Indonesian business to UOB Group. Moreover, it recently completed the sale and migration of its Taiwan consumer businesses.
(Source: Selena Li | Sumeet Chatterjee | Tom Hogue | Sonali Paul | Reuters)
