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HSBC HOLDINGS

Case 2-3


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HSBC Holdings

  • As of 2010, it’s the world's sixth-largest banking and financial services group

  • The world's eighth-largest company according to a composite measure by Forbes magazine

  • In 91 countries including: Africa, Asia, Europe, North America, and South America

  • 100 million customers

  • Abbreviation: Hongkong and Shanghai Banking Corporation


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HSBC Holdings

“Today we are a contender and not yet the champion. We aim to change that.”

--Sir John Bond, HSBC Holdings Group Chairman


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HSBC Holdings

  • John Bond’s goal is to make HSBC “the world’s local bank”

  • HSBC’s primary challenge is to create from its muti acquisitions, a seamless enterprise that follows a common design

  • In 2003, only Citigroup, Standard Chartered, and HSBC operated in multiple foreign markets for multiple clients


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Citigroup

  • In 2003, world’s largest and most profitable financial institution

  • Offices in 100 countries (60% of income from North America alone)

  • Line of business drove decisions (not local market concerns)

  • Outside of the US, Citigroup shunned joint ventures

  • Operated as a single bank with a single balance sheet

  • Traveler’s Group bought Citicorp and renamed it to Citigroup

  • European acquisitions

  • Bought Banamex which increased emerging markets to 25%

  • Board consisted of all American representatives except two


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  • Headquartered in London

  • Specialized in emerging market banking

  • 28,000 employees in 500 offices in 50 countries

  • $113 billion in assets

  • Although larger than HSBC, failed to grow quickly after 70’s debt exposure

  • Retained strength in Hong Kong, India, and Africa

  • In 2003, 15% owned by Khoo Teck Puat and UK insurer owned 5%

  • British execs represented 12/18 board members


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HSBC Holdings

  • Reorganized as HSBC Holdings in 1991, group headquarters relocated from Hong Kong to London

  • One of the largest banking acquisitions on record was when HSBC acquired the UK’s Midland Bank

  • This doubled their assets and enhanced their European presence

  • Dramatically broadened geographic scope


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HSBC Acquisitions

  • Created a significant European presence during the acquisition of the French company, CCF


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HSBC Control and Management

  • To promote rapid decision making and local accountability, the head office provided only the essential functions (HRM, strategic planning, legal control)

  • HUB (HSBC Universal Banking) which ran IT applications and credit control systems

  • Required subsidiaries to remit profits to the center

“Our traditional modus operandi really was as the world’s local bank. We had a local customer base, local management, local deposits, local lending. We acknowledged that the world is not a homogenous place that could be micromanaged from several thousand miles away.”

--local manager (pg.146)


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HSBC Control and Management

HSBC’s traditional strategy was to invest surplus profits from its dominant position in Hong Kong elsewhere to improve their performance

In 1998, HSBC overlaid “customer groups” upon its existing geographic organization which centralized and shared best practices in product development, management, and marketing


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How HSBC Differed from Competitors

All transactions exceeding $50 million were submitted to London for same-day approval which required regulatory parameters. This differed from competitors who let local managers decide what to distribute


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“Boring is Good”

  • HSBC was known as “thrifty, cautious, disciplined, and risk averse.”

  • HSBC managers emphasized to air on the side of caution.

  • Despite its extreme conservatism, its volatility is believed to benefit HSBC


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HSBC Character

Frugality has always been a virtue at HSBC where all staff fly economy class, including Chairman Bond. Bond took the subway to work and encouraged staff to turn off office lights at night.

HSBC created a program called International Managers for young recruits which gave them insight into the company and placed a value on determination and hard work


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HSBC’S Branding Techniques

After talks about possible decentralization, HSBC took a major turn around and formulated a new strategic plan. In 2002, HSBC rolled out the tagline “the world’s local bank” with $50 million spent on advertising.

“The global piece differentiated us, and the local piece made us relevant to local customers.”

--HSBC manager





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What can HSBC bring to a leading North American consumer finance company such as Household?

  • HSBC can bring to leading consumer finance company such as Household the structured international collaboration it took to focus on the local markets and apply that to the private consumer financing aspect of Household.

  • Household hoped to develop local consumer data by partnering with local subsidiaries of existing corporate clients and cross-selling financial products

  • HSBC’s reliance on Household’s skills required training and integration across the board. This depended upon the developing relationships between colleagues and cultural integration.


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Is HSBC organizationally ready to take on consumer finance? finance company such as Household?

  • HSBC has a 50 year perspective under their belt and is cautious in their decision making. HSBC is ready to forego a venture into consumer finance with the help of Household International. It has the foreign operations skills to know how to invest in client relationships and acquire funds from different markets. The only thing lacking is the knowledge of how to develop local consumer data.


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Should Sir John Bond have bought Household International? finance company such as Household?

  • The evidence indicates that Household had tripled HSBC’s provisions for bad debts. Household had also settled a course case dealing with excessively high interest rates. Clearly there was a rocky beginning with the buy out of Household but through diligent integration, Bond could successfully benefit from this acquisition.


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