HSBC's Strategic Shift in Digital Wealth Management: What Does It Mean for Pinnacle?

The British major bank HSBC is currently reviewing its digital wealth business Pinnacle in China, with a particular focus on expenses and operational controls. This measure could potentially lead to layoffs and suggests a departure from the unit's previous growth plans, according to insider information. The review, which began a few months ago, is primarily scrutinizing staff salaries and potentially inflated supplier costs. This is against a backdrop of a sharp increase in expenses, which has outpaced revenue growth. The results of these reviews are expected by the end of the year and could have significant implications for Pinnacle's workforce. Pinnacle, launched in 2020, offers insurance and fund products and forms a central component of HSBC's Asia-focused strategy. With investments of 3 billion US dollars in Hong Kong and mainland China in 2021, the bank has made it clear how important the Asian market is to them. However, under the new leadership of CEO Georges Elhedery, the financial institution is now tightening its belt in anticipation of a revenue downturn due to upcoming interest rate cuts by central banks. Pinnacle, which relies on digital platforms, has so far attempted to expand HSBC's reach in China beyond physical branches and has received investments of 390 million US dollars since 2020. As of June, the division employed at least 1,700 personal wealth advisors and planned to increase this number to 1,900 by the end of 2024, although the original target was 3,000 by 2025. The review highlights the challenges HSBC faces in increasing its revenues in the lucrative Chinese market, where the wealth and personal banking segment has not yet turned a profit and reported a loss of 46 million US dollars in the first half of 2024. At the same time, HSBC launched a new wealth program in Hong Kong this month to attract new international clients through its strategic location. With projections that by 2030 around 80 million more people in mainland China will belong to the middle class, the bank sees a significant opportunity to support their financial goals. Currently, HSBC Hong Kong serves over five million customers.