The World is more than enough for western banks and insurers
The World’s Favourite Bank, HSBC, continues its retreat back to its roots (see http://www.itsafinancialworld.net/2011/05/hsbc-goes-back-to-its-roots.html), with the annoucment of its withdrawal from Central America by selling its businesses in Costa Rica, El Salvador and Honduras to Colombian banking group Banco Davivienda. This comes on back of its withdrawal from retail banking in the US (http://www.itsafinancialworld.net/2011/08/hsbc-withdrawing-from-us-retail-another.html) Russia (http://www.itsafinancialworld.net/2011/04/hsbc-to-quit-russian-retail-banking.html) Chile, Hungary and South Korea. It has now also announced that it is selling its Thai business to Bank of Ayudhya.
This fundamental shift in strategy by HSBC announced last year by Stuart Gulliver represents a general trend across the Financial Services sector away from world domination or ‘everything everywhere’ to a strategy far more spreadsheet driven, where decisions are taken on the basis of whether in a particularly country a dominant market position can be taken and, if not, either not entering or withdrawing if already there. HSBC is not alone in this, Aviva has announced the sale of its operations in the Czech Republic, Romania and Hungary to Met Life.
How much of these strategies are driven by the need to rebuild balance sheets following the financial crash and the imposition of regulations, such as Basel III, Solvency II and the UK’s Independent Commission on Banking Report, requiring far higher levels of capital to be held, or the need to meet shareholder’s short term needs for a return on capital versus a lack of pioneering, entrepreneurial, long-term vision will only become clear in retrospect. Is it yet a further sign of the decline of the mature western economies? It certainly not the strategy being adopted by the emerging economies such as China with its long term investments into Africa, or even Australia with the likes of ANZ making strategic investments into Asia.
The latest announcement from HSBC will certainly not be its last. The ramifications of the financial crisis continue to reverberate across the globe.