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HSBC: UK biggest market in Europe

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Leading banking institution across United Kingdom in 2010:

The largest banking institution in United Kingdom, with domestic asset portfolio worth £667 billion in 2010, HSBC offers corporate, commercial & retail banking product portfolio to end consumers across the country. The company divested its insurance business activity to Marsh in 2010. UK retail banking is one the core segments for HSBC Holdings generating operating revenue of 5.65 billion witnessing a slow growth of 2% in 2010. It is publicly listed on London Stock Exchange with market capitalization of £115.8 billion (August 2011). Global banking & markets is the core segment with asset portfolio worth US$1,758 billion.

Second largest banking market across Europe:

United Kingdom banking segment reached US$10,902 billion, with year-on-year decline of 10% in 2009-2010. The segment is stipulated to reach US$15,108 billion in the next 2-3 years (2014). Bank credit is the biggest segment across UK banking market space accounting for 77.6% of total value (2010). The domestic market is slightly consolidated owing to distressed institutions been merged or acquired by the national government. Royal Bank of Scotland and Barclay's are the closest competitors for HSBC in domestic retail and commercial banking segments. In 2010, UK commercial banking segment witnessed moderate growth reaching US$5,777 billion (+5%) in 2010.

Improve regional penetration across retail and corporate banking in UK:

HSBC Holding has strong national penetration across the UK banking market with approximately 1,311 retail branches in December 2010. In April 2010, HSBC Holding divested European and global insurance brokerage subsidiary to Marsh & McLennan Companies for £135 million. On the other hand, the company launched new service facilitating UK domiciled population to open Renminbi (RMB) account to enhance market penetration across retail and corporate banking segments on long-term basis. Thus, HSBC Holding is divesting non-core assets along with improving value proposition for retail and corporate customer portfolio to enhance long-term sustainability.

Can HSBC improve local market penetration in high credit risk based UK banking sector in next 2-3 years?

Although the UK banking segment now finds itself in a relatively healthy position compared to 2008 economic downturn crises, institutions face Eurozone debt restructuring risk on medium term basis. UK banking segment exposure to the euro zone countries stood at £338.5 billion with Ireland and Spain accounting for 32% of total portfolio (2010). Further, majority of UK banks have exceeded the 7% core Tier 1 capital ratio. In the context of turbulent economic downturn and high credit and capital risks, will HSBC's corporate and commercial banking localization growth strategy improve long-term competitive advantage in UK?

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