In keeping with its strategy of exiting from non-core operations, HSBC Holdings plc (HSBC - Free Report) is planning to close its operations in Libya. The representative office of the bank in Tripoli, that manages investments in the country, will be closed. The news was first reported by The Telegraph.
The closure will sever HSBC’s ties with Libya, which dates back to 1959 when the company acquired The British Bank of the Middle East. Further, the bank also had a stake in the British Arab Commercial Bank, which it sold to the Libyan Foreign Bank in 2010.
At present, HSBC’s Tripoli office (opened in 2006) employs less than 10 people, constituting a small part of the company’s global operations.
The decision to close the Libyan operations was possibly taken after it failed to meet the criteria set by management for determining business exits. HSBC had closed its Iraqi operations on similar grounds in Jun 2013.
Since 2011, HSBC has been divesting or closing operations across the globe in its attempt to streamline businesses. Last month, the company had announced the sale of its Switzerland-based portfolio of private banking assets worth $12.5 billion to LGT Bank (Switzerland) Ltd. (Read More: HSBC Sells $12.5B Swiss Private Banking Assets to LGT Bank).
Also, HSBC has an expense-savings initiative in place. Following the success of the first round of its cost-savings plan, the bank announced the next round in May 2013 with a target to save an additional $2–$3 billion by 2016.
Apart from HSBC, many other global banks including Deutsche Bank AG (DB - Free Report) , JPMorgan Chase & Co. (JPM - Free Report) , Credit Suisse Group AG and Barclays PLC (BCS - Free Report) are undertaking streamlining initiatives to offset fundamental pressure.
We believe that HSBC’s plan to focus on its core, profitable operations will aid bottom-line growth going forward. With the slow economic recovery and continued low rate environment, the bank’s plan to cut expenses will prove to be a long-term catalyst.
Currently, HSBC carries a Zacks Rank #5 (Strong Sell).