HSBC move away from UK ‘would get investor backing’

Any decision by HSBC to relocate its global HQ out of the UK over frustrations with banking regulation changes would be backed by many investors, a leading Scottish institutional shareholder claimed yesterday.

HSBC Tower in Canada Square, Canary Wharf, London. Picture: Getty
HSBC Tower in Canada Square, Canary Wharf, London. Picture: Getty

David Cumming, head of equities at Edinburgh-based Standard Life Investments (SLI), which owns a 1.5 per cent stake in the banking giant, said he believed HSBC was “very close to losing patience” as banks are being required to meet “ever-increasing capital requirements”.

HSBC has launched a review of where to have its HQ amid frustrations with the regulatory environment, with Hong Kong seen as the most likely alternative. A decision is expected by early next year.

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Next month, the Bank of England is set to issue its latest stress tests, designed to check whether banks had sufficient capital to withstand another financial crisis.

Cumming said that SLI “along with a lot of other shareholders” would be supportive of a move to a new tax domicile by HSBC.

He accused UK regulators of constantly “moving the goalposts” with reference to the levels of capital lenders are required to hold.

“Obviously we need stress-tests and banks should have prudent capital,” Cumming told BBC Radio. “But I think this ongoing process of continually... moving the goalposts and with the Financial Policy Committee coming up with new wheezes in terms of getting the banks to hold more capital - I think HSBC are very, very close to losing patience with this never ending process.

“And I think a lot of shareholders, including ourselves, would be supportive of them moving, given the current situation in terms of regulation.”

Cumming added that unless there was a change in tack from regulators, HSBC could lose competitive advantage and a move away could result in better growth in earnings and dividend prospects.

SLI’s holding in the bank is worth more than £1.5 billion, making it the 12th biggest investor in the group. Keith Bowman, a banking analyst at Hargreaves Lansdown, said the bank’s decision was “hard to call”.

He said: “It would be sad to see the head office, and potentially some of the UK jobs, move away but it would be understandable given it would take some of the pressure off increasing the capital cushion.”

Bowman said that HSBC has many issues to consider, including the costs involved of moving weighed against any long term gains. Earlier this year ratings agency Moody’s Investors Service warned moving headquarters would draw “considerable management attention away from normal business”.

HSBC has already announced that it is to relocate the head office of its UK retail bank from London to Birmingham by 2018 ahead of new ring-fencing rules separating the operation from riskier investment banking.

The group moved its headquarters from Hong Kong to London in 1993.