HSBC Executive Addresses Speculation on Headquarters Move

A leading official at HSBC has sought to calm concerns regarding the potential relocation of the bank’s headquarters from the UK, particularly in light of anticipated tax hikes set to be revealed in Wednesday’s budget.

The bank’s chief financial officer, Pam Kaur, stated there was “no pressure” from its significant shareholder base in Hong Kong to leave London, despite warnings from lobbyists that elevated tax bills might compel large banks to take their business elsewhere.

On Tuesday, HSBC reported a notable 32% increase in third-quarter profits, totaling $9.6bn (£7.2bn), while also announcing plans to return $2.7bn to shareholders through dividends and buybacks.

Several lobby groups have cautioned that banks could relocate jobs and operations to competing financial centers if tax rises become a reality. Jamie Dimon, the CEO of JP Morgan, even remarked that he might reconsider plans for a new £3bn London headquarters if the UK were to adopt a “hostile” stance toward banks.

A limited number of affluent business figures have already indicated intentions to leave the UK, with some voicing discontent over Labour’s tax strategies.

It was revealed earlier this month that Chancellor John Healey intends to impose taxes on British banks in the upcoming budget, likely reversing the previous Conservative government’s reductions to the bank surcharge.

During a media call on Tuesday, Kaur emphasized, “Regardless of what happens with taxes, we are here to support our customers, and that is our priority.” She expressed confidence in HSBC’s presence in the UK, stating, “We are very comfortable, we are domiciled in the UK and we remain in the UK. So that question is just not on the table.”

HSBC has a robust shareholder presence in East Asia, where a significant portion of its profits are generated. The bank has faced pressures in the past to consider moving or splitting its operations due to UK regulatory changes, notably in 2015, when rising regulatory demands prompted discussions about relocating to Hong Kong. Following that, the Conservative government adjusted the levy to only apply to UK-based assets, benefiting HSBC.

In 2022, HSBC found itself under pressure to split its profitable Asian operations from its overall framework after the UK government required the bank to suspend its dividend during the initial COVID lockdown.

Kaur expressed support for Chancellor Healey and Prime Minister Andy Burnham, noting the bank’s optimism regarding the government’s growth plans, while indicating they would observe how businesses and customers respond to coming changes.

HSBC’s profits in the July to September quarter were enhanced by increased interest rates, fewer loan defaults, and reduced legal costs compared to the previous year. However, its shares listed in the UK dropped nearly 6% on Tuesday morning, which could affect its standing as the largest company on the FTSE 100.

Kaur noted that investors might have awaited stronger predictions for net interest income, which represents the difference between loan charges and deposit payouts.

The net interest income for HSBC climbed to $9.3bn in the third quarter, up from $8.8bn the prior year. This figure has become a focal point for groups advocating for a UK bank tax, such as the Trades Union Congress, which argues that banks’ profits have surged mainly due to rising interest rates rather than an increase in their performance.

However, HSBC reported that its net interest income growth occurred due to effective hedging methods and an uptick in deposits from Hong Kong, whereas the UK saw stagnant deposit levels.

TUC General Secretary Paul Nowak remarked that HSBC’s results indicate that banks can manage higher taxes. He criticized some financial advocates who have sought to prevent tax increases, asserting, “These results make it blatantly obvious banks can afford to contribute more.”

Abhijay Sood, an economist with the New Economics Foundation, commented that HSBC’s robust earnings might be disheartening for households grappling with rising mortgage costs. He pointed out that the bank’s profits largely stemmed from maintaining low interest rates on savings accounts and receiving indirect support from taxpayers through the Bank of England’s quantitative easing measures.

Sood suggested that while discussions of a potential bank tax change in the budget are encouraging, they may not be extensive enough, urging the Chancellor to go further to recover the indirect subsidies and use them for investments that combat inflation and help keep essentials affordable for everyday people.