Silver Point

Thomas J. Monaco

Independent Insight Provider

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

Equity Bottom-Up

As other names in our large-cap United States (U.S.) bank universe are publicly listed, they typically come under greater scrutiny than a privately held entity which is part of one of the largest banks in the world. As a result, HSBC North America (HSBC NA) – as a standalone entity – typically gets ignored by investors which are generally British or Asian-based. Between 2012 and today, HSBC NA (excluding-Canada) has gone from a very vulnerable and questionably solvent institution to one where it is now be considered the bell weather for capital strength. However, HSBC NA still remains an enormous drag on Group operating earnings with a loan book that continues to be liquidated, razor thin margins, and weak cost control.  <ul><li>Chronically Weak Earnings Despite Relying On Non-Recurring Revenues: HSBC NA chronically under-earns, and it simply cannot get out of the way of its own shadow. Stated ROEs and ROAs are notoriously weak - despite its reliance on non-recurring revenue sources. Given the bank’s “riskless” balance sheet and heavy cost structures, HSBC NA will continue to struggle to earn positive returns and remain a significant drag on overall Group profitability.</li><li> Strong Capital Base:  The global financial sector has recovered well in a world of quantitative easing, but senior management deserves a significant amount for credit for cleaning up this unit’s balance sheet and addressing its more serious headaches. Regulatory capital is among peer, and we would anticipate HSBC NA to repatriate upwards of USD 4 bn to the Group.    </li></ul>

As other names in our large-cap United States (U.S.) bank universe are publicly listed, they typically come under greater scrutiny than a privately held entity which is part of one of the largest banks in the world. As a result, HSBC North America (HSBC NA) – as a standalone entity – typically gets ignored by investors which are generally British or Asian-based. Between 2012 and today, HSBC NA (excluding-Canada) has gone from a very vulnerable and questionably solvent institution to one where it is now be considered the bell weather for capital strength. However, HSBC NA still remains an enormous drag on Group operating earnings with a loan book that continues to be liquidated, razor thin margins, and weak cost control.  Chronically Weak Earnings Despite Relying On Non-Recurring Revenues: HSBC NA chronically under-earns, and it simply cannot get out of the way of its own shadow. Stated ROEs and ROAs are notoriously weak - despite its reliance on non-recurring revenue sources. Given the bank’s “riskless” balance sheet and heavy cost structures, HSBC NA will continue to struggle to earn positive returns and remain a significant drag on overall Group profitability. Strong Capital Base:  The global financial sector has recovered well in a world of quantitative easing, but senior management deserves a significant amount for credit for cleaning up this unit’s balance sheet and addressing its more serious headaches. Regulatory capital is among peer, and we would anticipate HSBC NA to repatriate upwards of USD 4 bn to the Group.    

HSBC Holdings

HSBC North America - Such a Drag