HONG KONG/SHANGHAI – HSBC Holdings is reviewing expenses and operational controls at its China digital wealth business Pinnacle, in a move that could result in layoffs and mark an abrupt reversal of the lender’s ambition for the unit, several sources said.
As part of the review, the lender is looking at staff salary structures and probing whether suppliers inflated expenses, contributing to a sharp spike in costs that outpaced revenues, according to five sources familiar with the matter.
The review, which has not been previously reported, started a few months ago, the sources said. The review could result in layoffs, two of the sources said.
The bank plans to complete the review by the end of 2024, one of them said.
A spokesperson for HSBC declined to comment.
A downsizing of Pinnacle, which was launched in 2020 and sells insurance and fund products, would be a setback for Europe’s largest lender by assets, which has doubled down on Asia while divesting from less-profitable businesses elsewhere.
Under its new chief executive officer Georges Elhedery, HSBC – which makes the bulk of its revenues and profits in Asia – has been looking to rein in costs, with the bank bracing for revenue to take a hit as major central banks start cutting interest rates.
HSBC committed US$6 billion (S$7.85 billion) for investments in Asia in 2021 – half of that earmarked for Hong Kong and mainland China, as it looked to expand market share in the world’s second-fastest growing wealth market.
Pinnacle, through its reliance on digital, was meant to expand the bank’s reach outside its limited physical branch presence in China.
Since 2020, the bank has injected US$390 million into the two main operating legal entities of Pinnacle in China, a Reuters review of official business registration records shows.
The division