How the universal banking model will be reborn
Have HSBC and Citi found a way to cut costs and maintain revenues in Latin America? If so, local banks will not accept that quietly.
One of the curiosities thrown up by the awards research process in Latin America was that HBSC is winning new corporate banking relationships with multilatinas based in markets such as Colombia and Peru.
HSBC’s global leadership say that, despite the fact it no longer has full banking licences in these markets, they are actually improving revenues in traditional corporate relationship banking areas, such as cash management, trade finance and FX flows. HSBC naturally ascribes this to its own prowess. But I wonder.
I believe that such retention – and extension – of this business is actually a more accurate reflection of the fact that no local bank has filled the universal banking void created by the retreat of HSBC and Citi in recent years. These corporate banking services usually go to the main lending banks. The quid pro quo for the banks that provide these companies with (implicit or explicit) balance-sheet support is that the profitable cash-management and flow business goes to them.
But if these local relationship banks are constrained geographically from providing Latin American companies with the support they need (and there is a large and growing need to support these companies in Asia), then HSBC can win the business without committing to the wider relationship.