HSBC Looks to Streamline; Shadow Banking Becomes Task Force's Target

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Receiving Wide Coverage ...

For Sale: HSBC is in talks to sell its stake in China's Ping An Insurance, which is worth $9 billion to $9.5 billion, depending on which paper you believe. A deal could net the bank around $7.5 billion. The FT name drops "Thai billionaire Dhanin Chearavanont, who controls the Charoen Pokphand Group" as a potential buyer. While the move is apparently not in line with HSBC chief executive Stuart Gulliver's statement last year that he had no intention of selling its big stake in Chinese companies, it does fit in with his modus operandi of making "streamlining HSBC's sprawling global operations and increasing profitability" a priority. Papers also attribute the sale to stricter capital requirements set to go into effect next year that make holding a stake in financial institutions more "onerous." HSBC is, however, likely to retain its stake in other Chinese companies, including in the Bank of Communications. Financial Times, New York Times, Wall Street Journal

Shadow Banking on the Rise: A new report from the Basel-based Financial Stability Board has found the shadow banking system — which includes "hedge funds, private equity firms and other investment companies" — valued at a new high of $67 trillion worldwide last year. That stat — and various others disclosed in the report — has led the FSB to call for heightened regulatory control of the nonbank banking industry. "If it looks like a bank and quacks like a bank, it has got to be subject to bank-like safeguards," one U.K. regulator told the FT. Its current suggestions for doing so include setting clear limits for money market funds and tightening controls on securities lending and repurchasing. Financial Times, Wall Street Journal, New York Times

Extended: The European Commission has granted ING more time to sell its assets and repay its government bailout. The Dutch firm now has until 2015 to repay the $3.8 billion (plus a 50% premium) it still owes from the original $12.7 billion bailout. It also has until 2018 to completely divest its European, Asian and U.S. insurance businesses though it is expected to have certain percentages of these units sold off by various deadlines along the way. Chief executive Jan Hommen said the firm was pleased with the agreement as it leaves ING's "strategic objectives unchanged." Wall Street Journal, Financial Times

Wall Street Journal

A trustee for Lehman Brothers has ended a more than three-year feud with Citigroup over a $1 billion deposit the investment firm made at the bank the week it filed for bankruptcy protection by crediting "the LBI estate with $360 million in cash" and getting Citi to agree "to forgo another $75 million claim that was contingently paid to the estate at the beginning of the liquidation." Citi has long-held claim to the deposit "to offset losses it allegedly suffered for continuing to clear Lehman's foreign-exchange trades" after the firm's 2008 collapse. The deal is pending court approval.

More Citigroup layoffs are on the way as the bank is apparently expected "to eliminate 300 sales-and-trading jobs globally in 2012, according to people briefed on the process."

Financial Times

Investment job cuts are to be expected in general, according to a new private sector report that estimates "investment banks are set to shed another 40,000 jobs in the next few years" due largely to "sluggish trading and higher capital requirements."


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Big Winners and Losers for Banks on Election Night

Republicans won a sizable victory late Tuesday, retaking the Senate after losing it eight years ago. Banks, too, largely benefited, as an ally of the industry captured a Senate seat in West Virginia, two credit union allies fell and a key Democratic senator squeaked past. Here's how election night played out for banks.

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So many topics: However, Gulliver's travels are quite interesting. HSBC is abandoning the US market because HSBC "...doesn't understand the American consumer...", and now it is jettisoning a Chinese insurer, after stating he wasn't divesting Chinese businesses. Perhaps HSBC doesn't understand the Chinese business community any better. More to the point, HSBC IS AN OPPORTUNISTIC ENTITY, masquerading as a Bank. It is a multi-national corporation that will buy and sell more like a VC than a financial institution.

Shareholders are probably satisfied but can the corp. be trusted? I vote NO! It will leave whatever falls in its wake. The KEY POINT IN THE ARTICLE is that Gulliver will streamline the LOBs at HSBC. Further, the move may be a signal that a concentration in the Chinese market may not be a stable investment in light of new leadership there.

Gulliver says there are no plans to divest other Chinese holdings -we have heard that refrain before.

Richard Isacoff
Posted by riisacoff | Monday, November 19 2012 at 9:03AM ET
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