HSBC to Move US Fund Unit to Dublin - Analyst Blog
04 February 2012 - 2:49AM
Zacks
On Thursday, The Wall Street Journal reported that
HSBC Holdings Plc. (HBC) is planning to shift its
US fund administration division to Ireland. The primary reason
behind this move is to control costs and reorganize the company’s
businesses.
HSBC’s plan to relocate its fund services operations to Dublin
is expected to lead to retrenchment of nearly 200 employees in New
York. However, the final decision regarding retrenchment of
employees is likely to be taken over the next couple of
quarters.
The fund administration unit is a part of HSBC’s Securities
Services business and offers accounting and valuation services,
corporate and statutory compliance, and fund transfers. Though the
company will continue to provide services to a portion of its
clients from Dublin, others have been advised to look for other
fund administrators.
Moreover, this is a part of HSBC’s long-term strategy to bring
down its operating expenses. Back in May 2011, the CEO of the
company had announced plans to reduce the operating expenses by
$3.5 million by the end of 2013 through restructuring and
contraction of its global business.
Though US remain an important market for HSBC, this is not the
first time that the company is revamping its operations here. Last
year, the company had announced the sale of its 195 non-strategic
branches to First Niagara Financial Group Inc.
(FNFG) and its credit card business to Capital One
Financial Corporation (COF).
HSBC’s decision to scale back its operations from the US stems
from the fact that the company is facing tough regulatory and
economic environment in this country. Following the financial
crisis in 2008, various new regulations and low interest rates are
affecting the profitability in the banking sector.
Additionally, as a result of low corporate-tax rate and
proximity to Europe, Ireland is gradually becoming a preferred
destination for many companies to set up businesses and expand the
existing operations.
Further, HSBC is not new in Ireland. The company provides
corporate banking, private banking, fund administration and
insurance services through its 400 employees in that country.
Therefore, we believe that HSBC’s plan to move its fund
administration business to Dublin will benefit the company in the
long run. The company will be able to gain market share in Ireland
and this would further improve the company’s financials.
Currently, HSBC retains a Zacks #4 Rank, which translates into a
short-term ‘Sell’ rating.
CAPITAL ONE FIN (COF): Free Stock Analysis Report
FIRST NIAGARA (FNFG): Free Stock Analysis Report
HSBC HOLDINGS (HBC): Free Stock Analysis Report
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