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* To cut credit, rates trading assets by $100 bln
* Closing 975 clients, over 20 percent, to review 250 more
* Aims to raise GBM return on assets to 2.6 pct in 2017
By Steve Slater
LONDON, June 10 (Reuters) - HSBC's investment bankcould shed more than a fifth of its clients and plans to reduceits credit and interest rates businesses by $100 billion overthe next two years in its bid to improve profitability.
Under a strategic shift announced on Tuesday, HSBC said itwill reduce the assets at its investment bank by a third, or$140 billion, which will reduce the significance of the businessto Europe's biggest bank.
HSBC said its investment bank, known as global banking andmarkets (GBM), will sell $40 billion of legacy credit positions,cut assets at its rates and markets division by $60 billion andreduce low returning loans by $40 billion, according to apresentation.
Up to $100 billion of the assets being cut are held inEurope, mostly in Britain and France, said Samir Assaf, chiefexecutive of GBM.
GBM said it had shed 275 clients since 2011 and was in theprocess of getting rid of another 700, or more than 20 percentof its roughly 4,000 main client groups.
"We are working on clients that have low profitability orlow return for capital use," Assaf told investors and analystsat the presentation, saying GBM was also deciding whether tokeep another 250 clients.
The aim is to reduce the size of GBM, cap its costs andimprove its profitability.
TOP FIVE
Banks are putting increasing focus on their top clients andtrying to drop smaller and less profitable ones.
They are also focusing on product areas where they are inthe top five, which for HSBC includes foreign exchange (FX) anddebt capital markets (DCM) in all regions, rates trading in Asiaand Europe as well as equities in Hong Kong and the Middle East.
Other European banks such as Deutsche Bank,Barclays, UBS, Credit Suisse andRBS are also shrinking and losing market share to U.S.rivals such as JPMorgan.
HSBC ranked 12th in investment banking revenues in the lasttwo years and in the first quarter with 2 percent of industryfees, according to Thomson Reuters data. JPMorgan is the leadingbank with a market share of about 7 percent.
GBM, which has 16,300 staff and includes other businessessuch as balance sheet management and trade finance, made an $8.1billion profit last year, or 36 percent of HSBC earnings.
HSBC wants to lift GBM's return on risk weighted assets to2.6 percent in 2017 from 1.6 percent last year and plans toexpand in some areas, including FX and DCM in all regions andequities and M&A advisory in Asia.
It expects GBM revenues to rise by about 5 percent a yearfrom $18.1 billion last year and to keep costs flat at $9.1billion.
Assaf said he only expected about $400 in annual revenuedeclines from the reduction in assets, though analysts warnedthat many banks have seen bigger than expected revenue fallswhere they have cut assets. (Editing by David Clarke)
