HSBC Holdings plc

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HSBC Holdings plc was established in Hong Kong on 2 April 1991 as the official holding company for the HSBC Group. Its shares began trading on both the Hong Kong and London stock exchanges six days later. Prior to its establishment, the Group had been managed from the head office of the founding member – The Hongkong and Shanghai Banking Corporation. The restructure was necessary in order to modernise governance arrangements ahead of the potential acquisition of Midland Bank (now HSBC UK). The new holding company offered greater strategic focus and management control of an expanding organisation, now consisting of some 500 subsidiaries across 66 countries. As part of the restructure, the Group’s inner reserves were revealed publicly for the first time: HKD16.6 billion (GBP1.1 billion).

HSBC Holdings completed the full acquisition of Midland Bank in July 1992. It was one of the biggest banking deals in the world at that time, and dramatically shifted the balance of the Group’s worldwide assets to 46 per cent in Europe. The headquarters of HSBC Holdings were moved to London later that year to comply with UK banking regulations.

A few years later, HSBC entered the Latin American market with the purchase of a major Brazilian retail bank, Banco Bamerindus, in 1997 (sold in 2016). Argentina’s Banco Roberts was also acquired in 1997, followed by Grupo Financiero Bital (now HSBC Mexico) in 2002.

A major rebranding programme had already got underway in 1998. The hexagon symbol, first unveiled in 1983, was rolled out across the world, and the majority of subsidiaries started to adopt the HSBC name.

The Group’s presence in continental Europe was cemented in 2000 when Crédit Commercial de France (now HSBC Continental Europe) enquired about a possible merger. A deal was reached that July, giving HSBC a strong platform in the eurozone.

North America was also an attractive prospect at the turn of the millennium. HSBC had closed a deal for Republic New York Corporation and its private banking services, Safra Republic Holdings, in 1999. The purchase of Household Finance Corporation followed in March 2003. Household was seen as a good fit for the Group’s balance sheets due to its prominence in the US mortgage-lending market. However, it would turn out to be a controversial acquisition as the global financial crisis took hold, due to its significant share of the sub-prime market. Previously, the Asian financial crisis of 1997 had affected many of HSBC’s key markets. The bank had helped customers and governments maintain stability through this period of volatility, and the experiences of senior managers would prove crucial in the coming decade. In February 2007, HSBC released a trading update announcing large provisions to cover potential losses in Household. This announcement was one of the first warning signs of the financial crisis to come and alerted markets to the possible global impact that a downturn in the US housing market could have on banks. HSBC acted swiftly to curtail its own losses and provide much-needed liquidity to other institutions through interbank lending. Household was wound down in 2009.

HSBC Holdings plc completed a rights issue in 2009, raising approximately USD17.7 billion to maintain its capital strength and enhance its ability to deal with an uncertain world. Following the crisis, HSBC restructured its business through a programme of closures and disposals, and refocused on its strengths in Asia, and on markets most relevant to international trade and capital flows. This period also saw significant focus on global standards and investment in compliance capabilities, triggered by a Deferred Prosecution Agreement between HSBC, the US Department of Justice and other US and UK regulators.

There was also a shift to a more centralised structure. Four business lines, supported by core head office functions, would be led by global business heads: Global Banking and Markets; Commercial Banking; Retail Banking and Wealth Management; Private Banking. The new structure overhauled a system of country-led management that had served the firm for 145 years. The new model echoed that of Global Banking and Markets, which had successfully operated as a single global business for over a decade, and seen its annual profits double in that time. The centralised structure was further refined with the merger of Retail and Private Banking in 2020, creating Wealth and Private Banking.

Further reading: ‘The Lion Wakes, A Modern History of HSBC’ by Richard Roberts and David Kynaston (Profile Books, 2015); ‘The History of The Hongkong and Shanghai Banking Corporation’ volumes 1-4 by Frank H H Kong (Cambridge University Press, 1987-1991).