Last checked at 
(Adds analyst's comment, paragraphs 19-21)
By Alun John
HONG KONG, Jan 2 (Reuters) - HSBC is
being drawn into Hong Kong's political turmoil with protesters
attacking some of its branches and graffiti daubed on the famous
pair of lions that guard its city-centre headquarters.
Hong Kong is the bank's single most important market,
accounting for just over half of its $12.5 billion pre-tax
profits in the first half of 2019, though with the protests
tipping Hong Kong's economy into recession, HSBC and its peers
are expected to take a financial hit.
Until now, HSBC had largely escaped direct involvement in
the often-violent anti-government protests that have shaken Hong
Kong for more than six months even as other companies with
perceived links to Beijing have seen premises vandalised,
including Bank of China (Hong Kong), Hong Kong's
second largest bank behind HSBC.
But more recently, HSBC has drawn the ire of some protesters
who accuse it of being complicit in action by the authorities
against activists trying to raise money to support their
campaign.
Protesters link the bank's closure in November of an account
held by a group called Spark Alliance, which helps pay
protesters' legal costs, to the December arrest of four Spark
Alliance members on money laundering charges.
HSBC has strongly denied any connection.
"People are angry because they feel that HSBC has stopped
money getting to the protesters," one protester said on
Wednesday, of the decision to close the account as he stood in a
group taking photos of the damaged lions.
HSBC said in a statement after the arrests that the decision
to close the account was "in accordance to international
regulatory standards".
"Our decision is completely unrelated to the Hong Kong
Police’s arrest of the four individuals on 19 December 2019. We
closed the account in November 2019 following direct instruction
from the customer," the bank said.
It is highly unusual for HSBC to comment on individual
cases.
Two HSBC branches and seven indoor ATM clusters were closed
on Thursday, the first working day of the year.
Some had their windows smashed and "support Spark Alliance"
was spray painted on their walls during a New Year's Day
anti-government protest march. Others were damaged during
protests on Christmas Eve.
The two lions were daubed with graffiti and briefly set
alight after being doused in a flammable liquid.
HSBC said on Thursday initial cleaning of the lions had
begun.
"We are engaging conservation experts to advise us on the
professional restoration required and the process can take
time," the bank said in a statement.
'FINE LINE'
More than 90% of the $4.4 billion generated by HSBC's retail
banking and wealth management unit in the six months to last
June, came from Hong Kong.
HSBC has also deployed billions of dollars in China’s
southern Pearl River Delta region, adjacent to Hong Kong, and
has expanded its services in the world’s second largest economy.
Some analysts believe HSBC executives will have to explain
their Hong Kong strategy when they discuss annual results on
Feb. 18.
John Cronin, an analyst with Goodbody, said he expects to
hear about a push to grow in other Asian nations, especially
emerging markets, as unrest in Hong Kong continues.
"Even putting aside the political turmoil in Hong Kong,
HSBC's dependence on Hong Kong for profitability is something I
expect that management will seek to tackle," Cronin told
Reuters.
Beijing plans to integrate the Pearl River Delta and Hong
Kong and Macau to create an economic powerhouse under its
Greater Bay Area Initiative.
HSBC's entanglement in the protests underlines the tightrope
that companies have had to walk since the protests got going in
June in response to a now-withdrawn bill that would have allowed
extraditions to mainland China, where courts are controlled by
the Communist Party.
The demonstrations have evolved into a broad pro-democracy
movement.
"Clearly, there is a fine line for management to draw
between customers and the Chinese authorities,” said a head of
corporate governance at a UK-based asset manager and HSBC
shareholder.
Other Hong Kong companies have been damaged by being
perceived to be too supportive of the protests.
Cathay Pacific Airways was forced by Beijing to
suspend staff involved in the protests, and chief executive
Rupert Hogg and his top deputy resigned in August amid the
turmoil.
HSBC has previously been targeted by supporters of Beijing.
Users of China's Weibo social media platform shared
screenshots last year of an HSBC employee's Facebook posts
supporting the protests. The posts urged readers to complain to
HSBC management.
"Businesses now have to consider how three different groups
will react to their decisions: The Chinese government, Hong Kong
protesters, and Chinese consumers," said Kent Kedl, head of
Control Risks' Greater China practice.
(Reporting by Alun John; Additional reporting by Simon Jessop
and Lawrence White in London, and Jessie Pang and Mari Saito in
Hong Kong; Editing by Jennifer Hughes, Robert Birsel and Grant
McCool)
