HSBC cites low returns as it discontinues its industrial metals business

HSBC Holdings (LON: HSBA) said on Friday that it has decided in favour of shutting down its industrial metals business. The announcement, as per HSBC, is part of its long-term restructuring that is expected to save a total of £3.61 billion and see 35,000 workers laid off in the upcoming years to boost liquidity. Europe’s largest bank that has a workforce of roughly 235,000 people saw a 48% decline in pre-tax profit in the first quarter as COVID-19 weighed on its performance.

Shares of the company are currently about 2% down on Friday. At 382 pence per share, HSBC is roughly 35% down year to date in the stock market. Learn more about why prices rise and fall in the stock market.

HSBC faces criticism from British lawmakers and shareholders

In the industrial metals market, HSBC was never a prominent player. The bank had even pulled out of the space entirely in 2005. In recent years, however, it was slowly penetrating the industrial metals business again with a staff of only about 2-3 in the unit.

“We remain focused on growing our leading position in precious metals,” a spokesman for HSBC commented on Friday as he added that it did not make financial sense for the bank to continue its industrial metals business that consistently produced low returns.

In separate news, HSBC also expressed plans of expanding its investments in insurance and wealth management businesses in mainland China on Friday. The London-headquartered bank has recently been under criticism from British lawmakers and shareholders as it backed the recently proposed National Security Law to be imposed in Hong Kong, that critics see as a threat to freedom.

HSBC to establish a fintech firm in China

In its statement, HSBC said it is looking forward to establishing a fintech firm in China. Its life insurance operations will also recruit new workers to cater to its customers in Guangzhou and Shanghai with wealth management services (non-branch based).

In the long run, according to HSBC’s regional head (wealth and personal banking), Greg Hingston’s remarks in May, the British multinational investment bank is committed to becoming the leading wealth manager in Asia.

HSBC’s performance was also reported downbeat in the stock market last year with an annual decline of a little under 10%. At the time of writing, the London-based investment bank is valued at £77.83 billion and has a price to earnings ratio of 27.12.