HSBC faces its biggest threat in years: virtual lenders

DOMINANT FORCE::About 30 percent of the territory’s total banking revenue is up for grabs, which translates into about US$15 billion, Goldman Sachs analysts said

Bloomberg

Wed, May 01, 2019 - Page 10

HSBC Holdings PLC spent 150 years building a financial fortress around Hong Kong that touches nearly every aspect of life in the territory.

One of the bank’s biggest threats? A pack of upstart virtual lenders, which barely existed two months ago, backed by the likes of Standard Chartered PLC and Chinese Internet insurer ZhongAn Online P&C Insurance Co (眾安在線財產保險).

Few if any of the world’s largest financial companies dominate a single market quite like HSBC does in Hong Kong, a territory of 7.5 million people that accounted for about 60 percent of the bank’s pretax income last year.

That makes HSBC a juicy target for the handful of “virtual” lenders vying to shake up the territory’s banking market after securing first-of-their kind approvals in March.

HSBC already offers digital services as well as maintains branches in Hong Kong, so clients can use whichever channel they want, a bank spokeswoman said by e-mail.

These include trade transactions through blockchain technology, while HSBC’s PayMe mobile wallet has more than 1.5 million users, she said.

The bank’s adjusted revenue from Hong Kong rose 14 percent last year and it hired additional staff in the Hong Kong-China region, the spokeswoman said.

HSBC, which owns about 60 percent of subsidiary Hang Seng Bank Ltd (恒生銀行), has the biggest share across all major banking businesses in Hong Kong, according to an analysis by Goldman Sachs Group Inc.

It has also been the territory’s biggest mortgage lender in the secondary market for the past two years, Centaline Mortgage Broker Ltd data showed.

One of the three note-issuing banks in Hong Kong, HSBC dominates revenue share in the territory.

As well as mortgages, commercial banking powers the top line.

Pretax profit at the London-based lender as a share of Hong Kong’s GDP dwarfs the same ratio at the rest of the world’s biggest banks, data compiled by Bloomberg showed.

While Hong Kong is far smaller than China or the US, it is also a regional financial hub, servicing not only China, but much of the Asia-Pacific region.

HSBC’s revenue from Hong Kong accounted for one-third of its global total last year.

While small compared with many of the world’s major markets, Hong Kong’s attractiveness in banking is buoyed by its status as the world’s most expensive place to buy property — a position that has contributed to the biggest wealth gap among developed economies.

About 30 percent of the territory’s total banking revenue is up for grabs for the new virtual lenders, Goldman Sachs analysts said in September last year.

That translates to about US$15 billion, of which US$3 billion could come from HSBC and US$1.7 billion from Hang Seng Bank, they said.