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HSBC is dealing with tougher backlash in Hong Kong after an account closure sparked anger among protestors, leading them to vandalize branches and cash machines, The Wall Street Journal reports.
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The current issues come after HSBC closed an account that held funds used by Spark Alliance — a nonprofit organization that financed protest-related causes like legal and medical bills — and after police froze around HK$70 million ($9 million) tied to the account.
HSBC said that the closure was for regulatory and compliance reasons “categorically unrelated to the current Hong Kong situation,” per the Journal. Amid the unrest, the bank has closed several branches across the city, including in the busy Central and Wan Chai districts and has suspended service at more than a dozen ATMs and express banking centers in districts hit by protests.
The bank is in a difficult position in the region, caught between the ire of protesters and the possibility of irking the Chinese government. Between the branch closures due to vandalism and the threat that customers sympathetic to protestors will take their deposits elsewhere, HSBC’s Hong Kong business is suffering from the protests.
However, the bank likely has no choice but to comply with the demands of the police and the Chinese government: To do otherwise could quickly rattle the bank similar to how major Hong Kong airline Cathay Pacific Airways saw the departure of both its CEO and chairman after it drew fire from Beijing over employee participation in protests.
And HSBC can’t afford to get locked out of China, as Asia is far and away the bank’s most lucrative market. HSBC’s Asian businesses accounted for a whopping 87% of the bank’s adjusted profit before tax in Q3 2019, HSBC Interim Group CEO Noel Quinn said in an earnings call.
Furthermore, the bank is struggling in other areas: Quinn noted that HSBC’s Continental European business and its non-ring-fenced bank in the UK aren’t producing acceptable returns, and while its US Commercial revenue grew in Q3, it was well short of its 2020 target for return on tangible equity. This makes success in Asia — and by extension, China — mission-critical for HSBC, meaning that the bank will likely have to accept a drop in popularity among consumers who take issue with its compliance with the Chinese government for the sake of its business in the region.
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