By Denny Thomas and Lawrence White
HONG KONG, June 9 (Reuters) - By pinning its hopes forgrowth on Asia, and China's Pearl River Delta region inparticular, the reasons in favour of HSBC shifting itsheadquarters to Hong Kong are piling up.
Under a new strategy that will see it lose almost a fifth ofits workforce and slash its investment bank, HSBC said onTuesday that it is relying on an "Asia Pivot" to drive itsbusiness forward.
Chief Executive Stuart Gulliver told analysts and investorsthat central to this plan is the lender's ambition to become"China's international bank" and grow in the prosperous PearlRiver Delta region that Beijing wants to integrate Hong Konginto.
"The CEO's comments that Asia will be a hub for growth infuture would indicate that it's a very real possibility that theHQ will move to that region," said Brenda Kelly, head analyst atLondon Capital Group.
HSBC said it will use 11 criteria to examine whether to moveits headquarters from London, including a country's tax regimeand how strongly the government supports the growth of thefinancial sector.
Being domiciled in Hong Kong and focusing on the Pearl RiverDelta would certainly fit in with Beijing's strategy ofdeveloping the region's economy.
And moving out of London will allow the bank to escape the$1.5 billion bank levy that is equivalent to 11 percent of thebank's profit for 2014.
In a 27-page presentation dedicated to Asia, HSBChighlighted how the Pearl River Delta in China's southernGuangdong province already "corresponds in size to a leadingglobal economy," with an annual gross domestic product (GDP) of$857 billion.
And by 2025, the region and Hong Kong would combine as asingle megacity, overtaking Tokyo to become the world's biggest"banking city cluster" for retail and corporate banking revenue,HSBC said.
With that in mind, the bank is aiming to achieve $1 billionprofit before tax per year in that region alone, although it hasrefrained from specifying a date for meeting that target.
BACK TO ITS ROOTS?
Founded in Asia more than 150 years ago, HSBC was originallyheadquartered in Shanghai before moving to Britain when itbought Midland Bank in 1992.
While the Pearl River region, along with Shanghai's YangtzeRiver Delta hinterland, has been a major growth driver ofChina's economy for decades, HSBC said it now sees huge growthpotential from China's trade initiatives and huge infrastructureinvestment.
New rail links will slash travel times between Hong Kong andmajor cities in the delta including Shenzhen, Dongguan andFoshan.
HSBC plans to capture more revenues from the region byincreasing its branch network, increasing mortgage lending andloans to companies.
Its planned expansion in the Pearl Delta forms part ofHSBC's broader investment plan in Asia, hoping to capturerevenues from trade flows and the internationalization of theChinese yuan.
Analysts have expressed scepticism that HSBC will be able tomaintain its current levels of return as it reinvests in Asia,but Gulliver said he will be cautious in how he allows Asiaregional chief Peter Wong to deploy assets.
"We won't just give carte blanche to Peter," Gulliver said. (Editing by Rachel Armstrong)
HSBC Holdings (HSBA)
