HSBC SWOT & PESTLE Analysis

Strength

1. Geographic and business line diversification: In the words of Stuart Gulliver, HSBC is a bank that is bestowed with a diversified yet universal banking business model. The business model comprises of one Corporate Centre and four global businesses, namely; Retail Banking and Wealth Management (RBWM), Commercial Banking (CMB), Global Banking & Markets (GB&M) and Global Private Banking (GPB). This business diversification into specialized fields coupled with the exceptional talent pool that business possesses has made HSBC one of the world's largest banks. This sort of an operating model combined with capital strength and international network, provides HSBC a hedge even amidst political and economic instabilities. This was evident at the time of Brexit when customer activity across different business segments remained resilient. It was therefore credited with various prestigious titles including Asia’s Best Bank for Financing, Hong Kong’s Best Bank, Best Investment Bank in Middle East, Kuwait and Oman, etc. at the Euromoney Awards of Excellence 2020.

2. Strong capitalisation levels: HSBC enjoys a strong capital position supported by the fact that its CET1 (Capital Equity Tier 1 Ratio) is 14.7% as of early 2020, with an aim of maintaining the ration between 14%-15% by the end of 2021. Also, in accordance to the strategic measures being followed by the company it will lower its Risk Weighted Assets (RWA). Since the start of 2015 until now, RWAs worth $296 billion have been extracted. The size of balance sheet has increased, stimulated by an increase in customer accounts. Total reported assets were 6.1% higher in 2019 than in 2018. It is because of this strong capitalization that HSBC has been able to affect share buybacks and provide a sustainable dividend.

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Weakness

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Opportunity

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Threat

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Political

1. Political uncertainty surrounding EU: Britain's exit from the EU has given rise to both geopolitical tensions and the possibilities of changing political agendas in lieu of the uncertain relationship that the two would share. Political developments in the region are likely to render market volatility and impact cross border banking models. Moreover, customers' needs and requirements will also be affected. What is essential for the business is that Europe must not allow its financial capacity and capabilities to be diminished. The outcome of the political negotiations should be such that Europe continues to enjoy at least the same amount of financial capacity and related risk management services, keeping the availability and pricing similar to what existed before the Brexit.

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Economic

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Social

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Technological

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Legal

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Environmental

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