Pestle and Swot Analysis of HSBC
Analyse the internal and external environment of HSBC bank using SWOT & PESTLE
- For Barclays Pestle and Swot analysis, see Barclays Pestle & Swot.
- For Lloyds Bank Pestle and Swot analysis, see Lloyds Bank Pestle & Swot.
- For RBS Pestle and Swot analysis, see RBS Pestle & Swot.
HSBC is one of the world’s biggest banks with more than 284,000 employees, over 6,900 offices around 80 countries spread over Europe, Asia-Pacific, Americas, Middle East and Africa. The bank currently has its headquarters in London, and latest revenue was approximately £13billion with profits over £1.8billion for the year ending 2017 (Annual Report 2017).
PESTLE ANALYSIS OF HSBC
The external factors analysed in the Pestle framework are political, economic, social, technological, legal and environmental factors or “PESTLE Analysis”. Organizations use this framework to understand those macro-economic factors which can help them in identifying external threats or opportunities. But in order to deal with external threats or take advantage of external opportunities, an organization needs to analyse micro factors using other frameworks like SWOT or Porters 5 Forces (Grant 2005).
In this essay, I shall use the PESTLE Analysis to analyse the macro factors that HSBC face and SWOT analysis to analyse its micro factors.
HSBC’s management had to make an appearance in 2012 before the US Senate’s Permanent Subcommittee on Investigations (‘PSI’). The political hearings were related to an investigation by the PSI into potential risks to the US financial system from HSBC inadequate compliance with US regulations around money laundering and financial sanctions (HSBC Interim Report 2012). According to BBC (2012), US government held HSBC responsible for money laundering from criminal activities by drug lords amounting to more than $2.6bn in assets. The bank is now required to strengthen their compliance and risk management infrastructure and culture which is likely cost it a lot of money.
Many financial institutions are still feeling the effects of the 2008 financial crisis and the very real liquidity problem that led to the failure of others like Northern Rock. According to Franks (2009), banks like HSBC have been saved by the fact they are universal with product offerings all over many geographical locations. The HSBC chairman says is surviving and doing well because its underlying revenue growth is driven by Global Banking and Markets and Commercial Banking particularly in the faster-growing regions of Hong Kong, Rest of Asia-Pacific and Latin America where the economic outlook is more positive (HSBC Interim Report 2012).
Social issues like climate change and criminal money laundering are some of the social issues that HSBC is dealing with currently. In 2012, US government held HSBC accountable for criminal money laundering amounting to $2.6bn and asked the company to contribute considerable time and resources to monitor millions of potential crime transactions. HSBC is also gearing towards supporting a move to a low carbon economy and as a result, it’s providing climate financing, including environmental markets, debt and equity investment and insurance (HSBC Sustainability Report 2011 p15)
As the low carbon technology takes hold to support a low carbon economy, HSBC is beginning to invest in climate and ‘clean tech’ research. For example, in 2011, HSBC provided structured finance for low carbon emission bus systems in cities like Johannesburg and Panama making HSBC the market leader in climate technology financing (HSBC Sustainability Report 2011 p15)
According to Frank (2009), increased governmental regulation from the EU, higher capital requirements as well as new anti-money laundering requirements mean that HSBC has to deal with legal compliance that is costly and time consuming.
HSBC recognises the current trends in climate change and governments demanding organizations to reduce their carbon foot prints. HSBC says it’s committed to reducing its own carbon foot print by reducing recycling waste, transport emissions as well as improving energy efficiency in their buildings (HSBC Sustainability Report 2011).
SWOT ANALYSIS OF HSBC
China today is Brazil’s largest trading partner and the best part is, HSBC with its deep heritage in China as well as global geographical presence presents the bank with an increasing share of this international trade. As China continues to seek future trade opportunities in resource rich countries, HSBC is set to profit by financing this trade (HSBC Interim Report 2012)
As well as taking a reputation hit in the US, HSBC was forced in 2012 to take charges for mis-selling scandals in its UK market. These scandals were related to payment protection insurance and interest rate hedging products and cost the bank more than $1.3bn (FT.com)
Litigation amounting to$700m for potential fines linked to the money laundering failures at its US arm have damaged its reputation as well as brand leading Stuart Gulliver, chief executive, to describe the episode as “shameful, embarrassing and painful to everyone in the firm” (FT.com 2012)
HSBC has been delivering a successful financial performance in the last few years since its underlying revenue growth is driven by Global Banking and Markets and Commercial Banking particularly in the faster-growing regions of Hong Kong, Rest of Asia-Pacific and Latin America. It is these regions that represent future opportunities for growth. Another opportunity for growth is in Project Financing in the fast developing countries of Africa and Latin America. Project financing is favoured by developing countries which want to finance big, complex and costly projects such as power plants, natural resource extraction or building transport infrastructure, where banks like HSBC are essentially repaid by the revenues made from the project. As part of its Equator Principles coalition, HSBC is already embarking on Project financing together with other banks, and development agencies in countries. For example in 2011, HSBC was the “sole co-ordinator on a US$200 million rights issue for Soitec, a global leader in concentrated solar technology”. The bank led and “structured the largest international wind project financing to date in India for the Genting Group as well as supporting “Asia-Pacific’s first offshore dim sum bond issue amounting to US$116 million for China WindPower Group” (HSBC Sustainability Report 2011 p15).
To conclude, I would to state that although HSBC has suffered in western markets like US and UK, it continues to be resilient due to its strong performance in Asian countries where future growth is likely to remain strong.
HSBC Interim Report (2012) “HSBC Interim Report 2012” available at http://www.hsbc.com/financialresults[Accessed 13 February 2012]
Grant R (2005) “Contemporary Strategy Analysis” 5th Edition, Blackwell Publishing
HSBC Sustainability Report (2011) “Sustainability Report 2011” Available Online at http://www.hsbc.com/citizenship/sustainability/sustainability-risk/equator-principles-and-sector-policies [Accessed 13 February 2012]
BBC (2012) Senate report: HSBC 'allowed drug money laundering' Available at
http://www.bbc.co.uk/news/business-18866018 [Accessed 13 February 2012]
Franks J (2009) Impact of the financial crisis and bank failure, London Business School, Available at http://www.tspakb.org.tr/tr/Portals/0/57ad7180-c5e7-49f5-b282-c6475cdb7ee7/duyuru_seminer_julian_franks_sunum_27072009.pdf [Accessed 13 February 2012]
FT.com (2012) Nasty surprises hit HSBC’s performance, Available at http://www.ft.com/cms/s/0/672d269a-da65-11e1-a413 00144feab49a.html#axzz2Kv9f32j [Accessed 13 February 2012]
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