A much-anticipated strategic update continues the bank’s frustratingly slow pivot toward Asia, only with lower shareholder returns.
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Another year, another familiar-sounding strategic update at HSBC. The behemoth’s need to reiterate its pivot to Asia underlines what a slow, awkward process it is.
The London-headquartered, China-focused bank announced full-year results on Tuesday. As at peers, revenues were hit by lower interest rates globally and chunky allowances for pandemic-related loan losses. Unlike at investment-banking rivals, the bump in trading revenues from HSBC’s own trimmed-back business was a meagre offset. A much-anticipated new strategy amounted to more of the same—except for lowered shareholders returns.
The shares fell in early trading, extending a year of underperformance. For much of the past decade the stock has traded at a premium to most European peers because of HSBC’s strong business in Hong Kong and mainland China, both profitable, fast-growing markets. But that gap has narrowed considerably in the past year, likely for two main reasons: Investors want faster organizational change, and they are concerned that HSBC’s trademark business model of bridging East and West is getting more difficult.
The bank broadly delivered on its 2020 targets. However, return on tangible equity or ROTE fell to just 3.1% from 8.4% a year earlier, and dividends were suspended at the British regulator’s request. The pandemic seems a valid excuse. The real disappointment was in its guidance for future returns. Target ROTE has been reduced and delayed, even with an additional $1 billion in cost cuts. Dividend expectations were pared back too: The growing quarterly payment has been replaced with a 40% to 55% payout ratio, possibly topped up with buybacks or special dividends.
Strategically, the bank is still focused on shifting more assets from Europe and the U.S. into Asia, as well as increasing its wealth management business and making its operations more digital. The direction of travel makes sense, but the pace remains frustratingly sedate, particularly as competition in the region is picking up. Discussions continue about long-mooted exits from retail operations in France and the U.S.
The speed of change might accelerate under Chief Financial Officer Ewen Stevenson, who was put in charge of the new overhaul. A relative outsider, he joined HSBC in 2019 from RBS, now known as NatWest, where he led a far-reaching revamp of what was once the largest bank in the world by assets.
HSBC’s shares are also weighed down by geopolitics. Management says little on the topic of Sino-American relations, except to highlight a long history of successfully bridging international divides. That discretion may be the best way to juggle conflicting priorities, but does little to assuage investor concerns that its dual identity may eventually become untenable.
The bank has no good answers to geopolitical questions, giving it all the more reason to address organizational ones. For a company that makes much of its position in exciting high-growth Asian markets, HSBC’s expected returns are surprisingly modest. For its shares to regain their old lustre, that needs to change.
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With US$40 million already committed, the Global Talent Fund is attracting investor attention with a strategy focused on building globally scalable consumer brands alongside high-profile talent.
2 min
A new investment fund targeting celebrity-founded consumer brands has secured US$40 million in commitments and is rapidly approaching its US$50 million fundraising target, signalling growing investor appetite for alternative opportunities beyond traditional asset classes.
The Global Talent Fund, which has a maximum raise of US$100 million, focuses on building and investing in consumer businesses alongside celebrities, athletes, and influential personalities who play an active role as co-founders rather than simply endorsing products.
The strategy is based on the belief that changes in consumer behaviour, particularly the rise of social media and digital engagement, have fundamentally altered how brands are built and scaled.
GTF founding partner Jeremy Hunt, who is helping lead the fund’s strategy, said consumers increasingly feel connected to personalities they follow online and are more willing to support products developed by those individuals.
“Consumers are searching for content to engage with, and when a celebrity they like or follow takes them on the journey of creating a product or brand, they genuinely feel part of that process,” he said.
The fund is targeting high-growth consumer sectors including wellness, hydration, beauty and recovery, areas Hunt believes continue to benefit from strong global demand and ongoing innovation.
Rather than backing celebrity endorsement deals, the fund is seeking businesses where talent is deeply involved in product development, brand creation and long-term growth.
According to Hunt, authenticity remains one of the biggest differentiators between successful celebrity-backed brands and those that fail.
“The consumer can see clearly if someone is simply being paid to promote a product,” he said. “The winners are typically the brands where the celebrity has genuinely helped build the business from the ground up.”
The model has attracted support from several prominent Australian investors and business families, reflecting broader interest in alternative investments with global growth potential.
Hunt said consumer brands offered a level of tangibility that many investors found appealing.
“Consumer brands are what we touch, feel, smell and taste every day,” he said. “Our investors understand the growth potential in the model, but they also want to be part of the journey.”
The fund’s rapid progress towards its fundraising target comes amid growing recognition that celebrity influence, when combined with strong commercial execution and scalable business models, can create significant enterprise value.
With several high-profile celebrity-founded businesses generating billion-dollar exits in recent years, supporters of the strategy believe the opportunity remains in its early stages.
