HSBC’s review of whether to move its headquarters out of the UK could signal the end of the brand on UK high streets should the bank decide to float or sell its retail arm in the wake of its decision.
Britain’s biggest bank revealed the exit review earlier this month due to tougher regulations since the financial crisis. Like all large financial players, HSBC has to split its retail arm into a ringfenced firm by 2019 under the Vickers reforms, a process it has already begun and will be based on Birmingham.
By definition, the new entity would be more domestic and less commercial banking focused than its predecessor but HSBC chief executive Stuart Gulliver, said it would have to “consider its options” should the regulations prevent it from having much influence over the retail business.
Financial experts observe that the UK retail bank, which would have firewalls between itself and the parent company, would be easier to sell off though Gulliver has said it is too early to make a call on such a move while the rules are still being thrashed out. Should the spin off happen then it would raise uncertainty around the HSBC brand’s future in the UK, which has struggled to crystallise its deep-rooted British ties to people.
Neil Svensen, chief executive officer at Rufus Leonard, which has worked with the majority of financial brands including Lloyds Banking Group, said: "The fact that HSBC is thinking of moving its head office to Hong Kong won't have a serious detrimental effect on its brand in the UK. The issue becomes more important if it then makes the decision to float or sell its UK business. When the 2019 ring-fencing rules come into effect, this will probably be more than likely. That is when the big questions will have to be answered about what to do with the brand. So in the short-term this won't have a big effect, however longer term we could see HSBC virtually disappear in the UK."
For a bank that derives 78 per cent of its profits from Asia, with initials that stand for Hong Kong and Shanghai Banking Corporation, HSBC hardly feels like a bank that is quintessentially British. Indeed, last year’s revelation that the firm’s Swiss subsidiary had helped wealthy customers avoid taxes and hide millions accentuated the differences in priorities to customers to the likes of Nationwide and Clydesdale.
Jacques De Cock, faculty member at the London School of Marketing, said: “If you asked the local British populace if they thought HSBC was a domestic brand then they would say no. They’re not perceived as foreign as Santander but they’re very close.
“A big international bank and being good at it is probably harmful to a good retail presence. That’s why people like Nationwide or Clydesdale have a better profile because they’re good honest retail banks with no Ferraris in the car park and have positioned themselves as closer to their customer.”
While an exit from the UK would likely strengthen the global positioning of HSBC, it could also tarnish sentiment to the brand harboured by its loyal customers. Sentiment is a "powerful force in creating or damaging brand loyalty" and it is entirely possible that sentiment might turn against HSBC if it leaves the UK, said Terry Tyrell, worldwide chairman of Brand Union.
“By leaving London, arguably the world’s financial centre, with a heritage based on the acquisition of Midland Bank in the UK, many might cry ‘traitor’, shareholders in particular, many who held shares in the old Midland Bank, could understandably feel aggrieved at HSBC walking away from its spiritual heartland.”
Banks are traditionally loath to make changes when it comes to branding and so any decision about HSBC’s future on the high street will not be quick. Time will tell whether it is stick or twist.