HSBC, the biggest payer of the UK banking levy, will set out on Tuesday exactly how it plans to decide whether to keep its headquarters in Britain in remarks that will be closely watched by George Osborne as he prepares to deliver his Mansion House speech the following day to an audience of top bankers.
Despite a last-ditch lobbying push, the chancellor is expected to offer his City audience plenty of warm words on Wednesday while at the same time holding firm on the banking levy, which was a manifesto pledge.
Asked whether the chancellor was considering watering down his commitment to the levy, a Treasury spokesman said: “We are committed to maintaining our position as a global financial hub. And as set out at the budget, it is right that, as it becomes more profitable, our banking sector makes a fair contribution to fixing the public finances.”
HSBC will this week set out the methodology that will be used to determine whether to remain based the UK in a move that could reignite the debate about the wave of regulation that has imposed on the banking sector since the 2008 crisis.
The bank levy and rules requiring a ringfence to be erected between high street operations and investment banking businesses are expected to be the agenda set out by Stuart Gulliver, the boss of HSBC, at his strategy day on Tuesday.
He will be speaking just 24 hours before George Osborne is due to give his annual Mansion House address. The chancellor has faced intense calls from the finance industry to reconsider the scope of the levy which is imposed on the global balance sheets of banks, not just their UK operations.
Employers body, the CBI, is suggesting a review of the levy – raised nine times since 2010 to ensure it meets the chancellor’s revenue targets – may be warranted while the British Bankers’ Association is calling for a review of taxation on the sector.
Matthew Fell, CBI director for competitive markets, said: “Banks play an important role in financing the economy and repeated changes to the bank levy in recent times have been unhelpful. A review of its scope could help to ensure our financial services industry stays competitive and boosts investment.”
Gulliver said last month that the criteria the bank would use to decide whether to move out the headquarters out of the UK - where it moved in 1992 from Hong Kong - would be published alongside his latest strategy for the bank.
He is facing pressure from City investors to improve the returns of the bank, which has operations in more than 70 countries, by cutting costs and overhauling under-performing businesses. He is also battling to restore its reputation after a series of fines and an exposé by the Guardian and other publications about the tax avoidance strategies deployed for customers of its its Swiss arm in the past.
The review of the headquarters was first flagged in April and any change might impact as few as 250 roles or less.
At Tuesday’s strategy presentation Gulliver is also likely to face questions from analysts about his views on the high street business in the UK. The rules requiring a ring fence to be erected between between the retail and investment banking arms from 2019 has already sparked speculation that HSBC could spin off the UK business. Other high street banks have also been closing branches as customers more to digital banking.
At the helm since 2011 after a 30 year career at the bank, Gulliver has listed four countries which need urgent attention: the US, Turkey, Brazil and Mexico. The Brazilian operation is up for sale although Gulliver has indicated that the troublesome US business will be restructured rather than sold off.
Analysts also point to divisions which need tackling. The global banking markets arm – the investment bank – is also regarded by analysts as requiring attention. Gulliver has indicated parts of the businesses could be moved outside the UK.
Analysts at Barclays said: “Looking at HSBC from a divisional perspective shows that global banking and markets (GBM) consumes 45% of the group’s capital but makes significantly below the required return. It also makes the lowest revenue return of the three main divisions,” analysts at Barclays said.
At his first strategy day in 2011, Gulliver signalled 25,000 job cuts from a global workforce that then stood at 296,000 and has now fallen to 257,600. Another 20,000 could be facing the axe.
This article was written by Jill Treanor and Simon Goodley, for theguardian.com on Sunday 7th June 2015 19.05 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010