Dear henryleung,
I have been working a while on this one, I hope it's what you were
looking for:
HSBC
HSBC, ”The World’s Local Bank”, is one of the largest banking
organizations in the world. HSBC Holdings is headquartered in England
and operates in 81 countries and territories. Interests are
concentrated in Europe and Asia and to a lesser extent North America
(United States). Profits are almost equally divided between the
Corporate, Commercial and Personal banking lines of business.
It is suggested that pie charts be included from this link found on
the HSBC site:
Assets (geographic)
Profit before tax (geographic)
Profit before tax (lines of business)
Sir John Bond presentation to the Eighteenth Annual Strategic
Decisions Conference
http://a248.e.akamai.net/7/248/3622/c54fd491fade52/www.img.ghq.hsbc.com/public/group/shareholder/documents/investor_presentation_jun02.pdf
The HSBC 2001 Annual report shows a significant decrease in profit:
Gross profit $8,807 million down from $10,300 million.
Return on average shareholder funds 11.4% down from 16.5%
However this is almost fully accounted by $1,102 million losses and
bad debt provision attributable to Argentina.
The Environment
“2001 was an "annus horribilis" for the world economy in general and
for the banking
sector in particular” according to Rolf-E Breuer, spokesman for the
managing directors of Deutsche Bank and one of HSBC’s global banking
competitors. The slowing of the United States economy and its
follow-on effect to the Asian exporters adversely affected HSBC’s
results. However, it was the economic collapse of Argentina was the
major problem for HSBC, resulting in a $1.1 billion charge (HSBC
Annual Report).
Hallauer describes the major trends in the global banking environment
as:
increasing mergers and acquisitions
increasing market share by the larger banks
declining cost to income ratios
shrinking interest margins
and decreasing dependence upon interest margins.
Competitors
The obvious competitors are similar juggernaut sized global banking
groups such as Citibank, ING, JP Morgan Chase, Bank of America and
Deutsche Bank.
“…Some large multinational banks—the local subsidiaries of Citibank,
HSBC, and Standard Chartered—have developed strong and profitable
local franchises with a wide range of services. Others, including
JPMorgan-Chase and Deutsche Bank, are much more selective and in some
cases are narrowing their activities in emerging markets, refocusing
on investment banking and private banking activities.” (Adams)
However, depending upon the market segmentation virtually all sized
banks can present competition (Westwood).
Strengths
Size : The juggernaut strategy is based upon size: companies that
control large market shares usually outperform the average industry
return (Westwood).
Ability to successfully grow by mergers and acquisition: HSBC's
acquisition of Midland resulted in a fall in the ratio of cost to
income from over 70 percent in 1992, to under 60 percent by the end of
1997 (Molyneux).
Ability to successfully implement their custom electronic banking
application. Hexagon is the foundation of HSBC’s strategy to deliver
innovative services via Information Technology. Hexagon is focused on
business customers engaged in intercontinental trade and high-end
retail customers who use global banks to mange their personal global
finances.
Successful multi-domestic strategy combined with global branding.
Successful management structure, valued and valuable employees.
Weaknesses
HSBC has a greater and perhaps increasing dependence upon emerging and
less developed markets than many of its major global competitors. The
$1.1 billion writedown in 2001 being the most recent example.
Threats
HSBC’s development of emerging markets provides increased
vulnerability to external factors that are more likely to occur than
in developed markets such as: currency instability, financial market
instability, adverse government intervention and steeper economic
downturns. Obviously the benefits have exceeded the risks. Although
during 2001 HSBC fared less well than for example Citibank due to this
increased vulnerability.
HSBC is justifiably proud of its custom information system, Hexagon.
However, the importance of such systems combined with the relatively
short life-span of such products provides opportunities for
competitors to overtake HSBC’s advantages in these areas.
Opportunities
HSBC stated aim is to be the World’s Leading Financial Services
Company (Bond). This requires HSBC to transform itself from a global
bank to a more diversified global financial services company such as
Citibank. The challenge will be to do this while increasing
shareholder return, another major aim and maintaining its already low
cost base. Current directions which could be expanded include greater
diversification into equity products which is currently being pursued
via HSBC Merrill Lynch, increased presence in insurance and card
products.
Despite the 2001 decrease in revenue from this line of business,
Private Banking is regarded as an important high profit opportunity
for growth as it currently only contributes four percent of profit.
The World’s Super 50, www.forbes.com requires free login
Top 15 Largest Global Corporations in aggregate sales, assets, profits
and market value. (Ranks Citigroup, HSBC, ING, JP Morgan Chase, Bank
of America in the top 10)
http://www.forbes.com/forbes/2001/0723/134tab1.html
HSBC, Annual Report 2001
http://a248.e.akamai.net/7/248/3622/031b7599afea77/www.img.ghq.hsbc.com/public/group/shareholder/documents/hsbc2001ar_1.pdf
Breuer, Rolph-E, Deutsche Bank 2002 Annual General Meeting… generally
tough environment
http://public.deutsche-bank.de/global/db/hv/hv2001nav_e.nsf/frameset/SFRE-4WQDG3?OpenDocument
HSBC 2001 Annual Report
http://a248.e.akamai.net/7/248/3622/b2140b1845307e/www.img.ghq.hsbc.com/public/group/shareholder/documents/hsbc2001ar.pdf;$sessionid$3NOYFQQUAEDBNQFIWEQR2RY
Electronic Commerce Awareness, An overview of Hexagon.
http://www.isss-awareness.cenorm.be/Case_Studies/HSBC_case_study.htm
www.brandfinance.com, Gradual branding strategy
http://www.brandfinance.com/02.pdf
http://www.eib.org/efs/eibpapers/y99n1v4/y99n1a09.pdf
Westwood, John, P., and Holland, Christopher, P., Size and Strategy in
Global Banking
http://www.wmrc.com/businessbriefing/pdf/Globalbanking2001/Ref%20Section/Ref7.pdf
Hallauer, Bindia, Empowering the Banking Industry…Global banking
trends: http://www.theasianbanker.com/A556C5/Download.nsf/B968085AEAEDBFA548256B7200325534/$File/ABS2002_Hallauer.pdf
Adams, Charles, Litan, Robert E., Pomerleano, Michael, Managing
Financial and Corporate Distress: Lessons from Asia (2000)… Emerging
market strategy
http://www.brook.edu/dybdocroot/press/books/chapter_1/open_doors_ch1.pdf
Further links for your information
Bank for International Settlements (BIS), International banking and
financial market developments. This article discusses the general
environment.
http://www.bis.org/publ/r_qt0206.htm
HSBC factsheet
http://a248.e.akamai.net/7/248/3622/5e1f486a88431c/www.img.ghq.hsbc.com/public/group/information/secondary_content/documents/en/group_fact_sheet_march_2002.pdf;$sessionid$0KUYJSN3NXVLTQFIWEPR2RY
For your interest, development of strategy
http://www.druid.dk/conferences/nw/paper1/menuhin_mcgee1.pdf
Regards, |
