HSBC's equities revenues plummeted since shunt to Hong Kong

What happened? We called out HSBC's woeful equities revenues when the bank reported its first quarter results in May. Today, HSBC has reported its second year results, and we're calling them out again. 

The second quarter wasn't good for equities traders at any bank, but while Goldman Sachs' equities sales and trading revenues rose 1% year-on-year and Bank of America's fell 2%, HSBC's equities revenues were down 53%. In the first half of 2023 as a whole, they are down...67%.

Needless to say, HSBC has some justifications for this. The commentary accompanying today's results talks of, "lower client activity as a result of reduced market volatility," and the fact that the comparator year (2022) was unusually strong. But no other bank - not even Barclays - has reported such a fall, and as we noted back in May, 2022 wasn't that strong; HSBC's Q2 equities revenues are also down 60% versus 2019.

This might be because HSBC doesn't include thriving prime services revenues in equities line. However, at the risk of confusing correlation with causation, it's tempting to blame HSBC's decision to transfer equities professionals from London to Hong Kong in 2021 for its declining fortunes. Key London people like Oliver Kadhim were moved to Hong Kong at the time. Equally impactful, though, may be the fact that headcount was cut consistently in the division as part of HSBC's 2020 restructuring plan, with London bearing the brunt of the cuts. 

There may be more at play. As technology dominates equities trading, the business is increasingly a winner takes all game. The big US banks with the big high speed trading systems are the winners; the more marginal players are being squeezed. With equities trading revenues of less than $100m in the quarter, HSBC falls into this category. 

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