| Simon Wainwright, the new country head of the island of Ireland for HSBC, describes the challenges in banking during the credit crunch. He outlines the challenges in it’s corporate banking business and the opportunities for HSBC in the Irish market. Wainwright details the different aspects of HSBC’s Irish operation and the challenge of integrating diverse Irish businesses - such as the securities servicing business that employs 550 people and the newly launched private banking business. |
Simon Wainwright, head of HSBC Ireland, Ireland’s second largest international banker in terms of numbers employed, says the credit crisis has meant banks must now ‘pick and choose, more carefully’ with their lending criteria and investment choices. He says, the ‘competitor pressure on price is lessened’ amongst banks currently, whereas pre-August there was ‘more negotiation and less banking.’ These factors, he says, have resulted in a ‘mature view coming back into the market.’ | | Simon Wainwright, country head of HSBC Ireland |
Wainwright says, the credit crisis has meant HSBC can focus on its core banking values as a relationship bank by developing ‘partnerships’ with its clients. He says, pre-August there was a ‘brokerage mentality’ with customers. Now due to pressures in the market, advising the client ‘is at the centre of transactions’ which are fundamentally ‘ long term.’
Wainwright says, the problems in US mortgages need to work through the system. Wainwright quotes HSBC group CEO Michael Geoghegan, who has said property is ‘taking a pause.’ Despite the pressures caused by the financial system, Wainwright believes the US will ‘avoid a recession by the skin of its teeth.’
HSBC were the first of the 10 biggest banks to take losses on US mortgages, when it wrote off $8 billion of its exposure to the sub-prime market. Wainwright says that the ‘the tail of the writedowns’ has been reached. The focus after these writedowns for HSBC is the ‘collecting and rescheduling that debt,’ he says. Wainwright says they are ‘strongly capitalised’ and HSBC has been ‘adding to its capital base for 2 - 3 years’. The bank has a tier 1 capital position of 9.3 percent.
The biggest growth area for HSBC in securities services has been the hedge fund and the alternatives business it acquired when it bought the Bank of Bermuda in 2003/04 . HSBC currently employ 550 in securities services in Ireland. The HSBC European training centre is located in Dublin, the logical location for its training centre, says Wainwright, when considering Ireland’s global reputation in funds.
HSBC’s securities business in 2007 outsourced some of its reporting functions from the Dublin office to India. In light of industry concerns surrounding the introduction of a fund management passport in Europe, HSBC’s decision shows the benefit of outsourcing some its back office functions out of Ireland. Wainwright says, the work is moved off shore to India then comes back onshore to Dublin. The major preparation is done on-shore and the customer services work is located in Dublin. The ‘higher value chain work’ is based in Ireland. He says ‘there have been no job cuts in moving these functions’ and consequently more ‘value added jobs will be based’ in Ireland.
Wainwright puts the success of the IFSC down to ‘the openness of Ireland’s economy and the business friendly environment’ that is driven by ‘a positive fiscal structure’. A major difference between the business environments of Northern Ireland and the Republic of Ireland is highlighted by the percentage of GDP that comes from the public sector. On the one hand, 24 per cent of the GDP of the South comes from the public sector this is less than half the 63 per cent of the North’s GDP which comes from the public sector. Wainwright says, when you look at a region like Scotland or Northern Ireland ‘corporation tax sticks out like a sore thumb,’ as an obstacle to growth of their financial services’ industry.
Wainwright’s role at HSBC is to treat Ireland, North and South, as one opportunity to cultivate an all Ireland strategy. HSBC have had a representative office in Ireland since 1979 yet it is only in recent years with the growth of its fund business and the launch of its new corporate banking and private banking businesses that HSBC’s presence has been so notable in the Irish market. HSBC are now the second biggest international bank in Ireland in terms of numbers employed behind Citi.
HSBC’s Irish business is due to benefit from the global importance of insurance to the bank. Wainwright says, HSBC’s reinsurance business is set to be a huge part of their insurance business going forward. ‘This technical business is strategically important’ to the whole group. With the other insurance functions on HSBC’s books, Wainwright says ‘by taking an increasing amount of reinsurance risk on their balance sheet it offers HSBC more value.’ |
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