Given the shift in customer preference toward online banking, especially after the pandemic,
HSBC Holdings plc ( HSBC Quick Quote HSBC - Free Report) is closing about a quarter of its branches across the U.K. The move will come into effect next April. HSBC is expected to shut almost 114 branches across the country. Per the bank, some of these branches serve fewer than 250 customers a week at present. This is because there has been a drastic decline in the number of people that physically visit branches over the last five years. On the contrary, HSBC said that the use of its mobile banking application has almost tripled since 2017, with the majority of the transactions completed digitally. HSBC’s move will likely put 100 jobs at risk. But the bank said that it hopes to redeploy all its employees at affected locations to other roles. Jackie Uhi, HSBC U.K.’s managing director of distribution, said, “People are changing the way they bank and footfall in many branches is at an all-time low, with no signs of it returning. Banking remotely is becoming the norm for the vast majority of us.” Uhi added, “The decision to close a branch is never easy or taken lightly, especially if we are the last branch in an area, so we’ve invested heavily in our ‘post-closure’ strategy, including providing free tablet devices to selected branch customers who do not already have a device to bank digitally, alongside one-to-one coaching to help them migrate to digital banking.” HSBC’s decision to close the U.K. branches comes just a day after the bank agreed to sell its Canada banking business — HSBC Canada — to Royal Bank of Canada ( RY Quick Quote RY - Free Report) for a base cash consideration of CA$13.5 billion ($10.1 billion). Per the deal, expected to close in late 2023, RY will acquire all the issued common equity of HSBC Canada. Also, RY will buy all preferred shares and outstanding subordinated debt issued by HSBC Canada for CA$1.1 billion ($0.8 billion) and CA$1 billion ($0.7 billion), respectively. There will be an adjustment for any additional equity capital contributions made to HSBC Canada. Our View
HSBC has been under immense pressure to improve its performance and reduce costs. Over the past several years, the bank remained focused on profitable markets and enhancing operating efficiency by divesting/closing non-core businesses. Driven by these efforts, it was able to control expenses.
However, overall costs have been increasing lately, given HSBC’s focus on growing market share in the U.K. and China, as well as strengthening digital capabilities globally. Thus, in February 2020, the bank announced its transformation plan, aimed at reshaping underperforming businesses, simplifying complex organization and reducing costs. As part of this initiative, HSBC expects to incur $6.5-$7 billion in charges and achieve at least $5.5 billion of cost savings by 2022-end and an additional $0.5 billion of savings next year. Moreover, HSBC has been undertaking measures to bolster its performance, focusing on building operations in Asia, including Hong Kong and China. It intends to position itself as a top bank for high-net-worth and ultra-high-net-worth clients in Asia. Over the past year, shares of HSBC have rallied 7.7% against a decline of 4.3% of the industry.
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Currently, HSBC carries a Zacks Rank #2 (Buy). You can see
. the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here Another top-ranked stock from the same space is Banco De Chile ( BCH Quick Quote BCH - Free Report) . BCH currently sports a Zacks Rank of 1. Over the past 30 days, the Zacks Consensus Estimate for its current-year earnings has been revised upward by 6.7%. Over the past year, shares of BCH have gained 2%.