How HSBC Bank Endured for 153 Years With $2.5 Trillion in Assets

Discover the story behind HSBC. The bank has endured for 153 years, amassing $2.5 trillion in assets by learning from Chinese trade. Learn how it did it, and some key lessons you can adopt to achieve greater success!

Most people across the world are familiar with the acronym HSBC and probably know that it represents a renowned bank.

But a couple of things not everyone might know are that HSBC stands for Hong Kong and Shanghai Banking Corporation, and it holds more than $2.5 trillion in assets, making it one of the world's largest financial institutions.

In fact, HSBC Holdings plc is the world's seventh-largest bank by total assets and the sixth-largest public company in the world.

In actual branches and customers, that translates to almost 4,000 offices in 67 countries on six out of seven continents, serving the 38 million people who bank with HSBC.

HSBC's customer base is definitely beyond impressive.

And I can understand why.

When it comes to choosing a bank, I personally value the customer service, the strategies for wealth management, and the knowledge that my money is secure with a Federal Deposit Insurance Corporation-insured financial institution.

I also want to be able to trust that my dedicated relationship manager will help me get the most out of my money.

And HSBC seems to tick all these boxes.

Apart from those, there are tons of other things HSBC customers say they value, like the instantaneous, fee-free international transfers between HSBC accounts, access to more than 20,000 ATMs in 40 countries across the world, and easy online banking.

Although HSBC's size, assets, and offerings are mighty impressive now, the financial institution has had its fair share of ups and downs in years past.

As with most financial institutions with a large customer base in the U.S., it wasn't immune to big losses during the mortgage-driven crisis of 2008-2009.

During that time, HSBC unloaded nearly 200 U.S. branches just to stay afloat.

It successfully recovered in the years that followed, until 2012 came along, which was the year it was caught red-handed helping Mexican drug cartels launder money.

(Real life—not a movie plot!)

HSBC admitted its wrongdoings and paid an infamous and mind-numbing fine of $1.9 billion dollars for money laundering violations.Profits of HSBC from 2007-2017

Bouncing back and getting stronger

Despite its checkered past, HSBC remains a banking powerhouse today, maintaining four business groups—collectively known as HSBC Group—each serving distinctly different markets.

The British multinational banking and financial services holding company operates in the areas of commercial banking, global banking and markets, retail banking and wealth management, and global private banking.

By keeping each part of HSBC tightly focused on its most profitable sectors and adapting to a rapidly changing marketplace, HSBC remains a financial leader in North America, the Middle East, Asia, Europe, and across the world.

It has been able to achieve this by following a well-thought-out strategy that allows room to pivot when the time is right.

More than one and a half centuries of check marks

HSBC grew from its roots as the brainchild of Scotsman Thomas Sutherland when, in March 1865, he determined that Hong Kong and the China Coast lacked local banking facilities capable of supporting international commerce and trade.

His solution? Launching the first branch of HSBC.

A month later, Sutherland opened a second branch in Shanghai, changing the world of Hong Kong and Shanghai banking forever.

In the decades that followed, HSBC transformed local banking across nearly every continent.

And through all those years, every branch it opened remained true to its founder's foreign-focused goal—to be a truly local bank that serves international needs.

In business and in life, we can all take steps to become more successful by following a few key lessons from HSBC's 153-year history.

Weathering a mortgage crisis. Check.

Redeeming itself after a scandalous association with drug cartels. Check.

Emerging from embezzlement allegations. Check.

We may not all acquire $2.5 trillion in assets, of course, but we can learn from HSBC's failures and mistakes to become tops in our own fields, especially when it comes to personal finances.

Becoming One of the World's Largest Banks

Through mergers, acquisitions, and smart customer service, HSBC gracefully bounced back from virtually every controversy

Founded in Hong Kong in March 1865 as the Hongkong and Shanghai Banking Corporation Limited, and establishing itself in Shanghai just one month later, the bank placed heavy emphasis on local service from the very beginning.

Keeping customer experience a top priority. Today, HSBC works to maintain state-of-the-art online banking features and ensure that the customer experience on its website and digital platforms is easy, convenient, and secure.

Facing failure head-on. HSBC has never been afraid of dealing with failure, acting quickly to shed unprofitable ventures and come out on top.

Where other banks crumbled during the financial crisis, HSBC bounced back by tackling the weaknesses the crisis exposed and setting itself up for a quick turnaround.

It offloaded 200 U.S. branches and also closed 800 offices acquired in 2003 from Beneficial and Household Financial, a company heavily involved in subprime lending.

In 2009, after many of HSBC's competitors had already received bailouts from the U.S. government to keep themselves afloat during the subprime lending crisis, HSBC was boldly trying to get back to growth by raising $18 billion in capital through selling shares.

Sometimes, that's what it takes to be successful—to admit when you've made a mistake and take the necessary steps to fix it, no matter how painful.

From money laundering scandals to subprime mortgage crises, HSBC always seems to recover—and go on to become stronger and more profitable than before.

Streamlining without sacrificing service. By re-evaluating business operations and eliminating extraneous roles, HSBC has managed to save $4.7 billion annually and improve service to its customers.

Since the economic recovery after the subprime crisis, HSBC has stayed on a rapid growth trajectory with a significant foreign focus.

Working to create a unified worldwide brand, HSBC has returned to its roots as a local bank operating globally and honed its focus on Asia, where the bank has always been profitable.

Let's take a closer look at the three ways HSBC has grown to amass $2.5 trillion in current assets and then explore the lessons the bank learned along the way.

Radical reinvention reduces expenses, streamlines operations, and improves profitability

The only constant for HSBC Holdings plc?

Change.

Even now, the bank is undergoing its third review and restructuring since 2011 to further cut costs, improve service, and thrive in today's economic climate.

Reviewing and revamping, regularly. While the bulk of changes to HSBC's branches are taking place in the U.S., HSBC will look anywhere to cut dead weight.

In 2015, the bank made plans to cut approximately 25,000 full-time jobs.

That's 10% of its workforce!

About 8,000 cuts took place in Britain, but no territory was safe.

Around the same time, the bank sold its operations in Turkey and Brazil.

Results matter, so HSBC left no region unexplored. The job cuts in Britain, which the bank considers one of its two main bases of operations, were historically significant.

But these were not the only major changes.

Since 2011, HSBC has sold off 100 underperforming businesses and exited 18 countries.

It also reduced its global investment banking business, the least profitable of the four HSBC groups.

Reshaping its business to the tune of $4.7 billion. HSBC eliminated unneeded roles by automating processes.

The results included quicker loan approvals, streamlined customer service through live chat and screen-sharing programs, and faster credit card approvals.

Customers in Asia reaped additional benefits, including the ability to view payment status in real-time.

Cutting itself free from dead weight. "Never stop evaluating," could be HSBC's mantra.

Low-interest rates and stringent regulatory requirements have left HSBC unsatisfied with its revenue and concerned about future growth.

The bank is closely evaluating profitability in 25% of its remaining 67 markets.

It is considering dumping its consumer banking operations in underperforming areas, including Bermuda, Malta, and Uruguay.

With such diligent review and the willingness to take action, HSBC is sure to remain on top.

HSBC understands what matters in marketing

By using a savvy marketing strategy and building a unified brand, HSBC achieves success in the U.S. and abroad.

Consistency matters. As part of its national and international outreach efforts, HSBC adopted a unified brand in 1998.

The hexagon symbol is now an emblem of trust, convenience, and personalized service, recognized as HSBC's watermark across the world.

All parts of the HSBC Group adopt the symbol, easily recognizable to customers, shareholders, and staff who all know HSBC stands for local banking on a global scale.

Strategically attracting the younger generation to build a profitable future. A good chunk of the world's wealthiest folks send their children to U.S. universities to get the best education.

And before they do, they try to set them up with bank accounts at a financial institution that has a trusted and recognizable brand.

Attracting international college students is an important part of HSBC's international growth strategy, and online savings accounts are one way it does so.


Primary Funding Sources For International Students Studying In The U.S.

By marketing to the international youth, HSBC is helping to ensure a solid and profitable future across the world and creating demand for its global banking and markets group.

This strategy also builds a foundation of familiarity and trust in the minds of these young students who represent the next generation of international business-owners and future industry leaders in their respective home countries.

HSBC Returns to Its International Roots

HSBC sticks with what works: a foreign focus forecasts a profitable future

Founded in Asian centers of commerce and trade (Hong Kong and Shanghai) as a local bank serving a global market, HSBC has always had a strong foreign focus.

Today, HSBC uses its world-renowned brand name to attract a new customer base of immigrants within the U.S., while simultaneously shoring up its global business to increase profits.

Leveraging incredible opportunities to expand. In 1980, HSBC was worth $47 billion with a strong Asian base.

Back then, the bank employed 35,000 individuals in 800 offices and branches.

The '80s and '90s brought an era of expansion when HSBC first purchased Marine Midland Bank, based in Buffalo, New York.

Almost a decade later, HSBC moved its headquarters to London after buying Britain's Midland Bank.

HSBC strengthened its global foothold by purchasing financial institutions in Brazil, Mexico, Argentina, France, and Turkey, as well.

At the height of the subprime crisis, HSBC maintained 10,000 locations, supported approximately 350,000 employees, and held $2.5 trillion in assets.

Drawing on its international history to maintain solid growth. Today, HSBC maintains its global focus even when doing business in the U.S.

The bank builds upon its recognizable international brand name to attract immigrants to the United States and international businesspeople.

HSBC serves regions within the U.S. that welcome 80% of the newcomers to the country.

HSBC's 230 remaining branches reach the bank's target demographics across New York, New Jersey, California, Washington D.C., and Florida, as well as Virginia, Delaware, and Pennsylvania.

HSBC may no longer have the 1,600 U.S. branches it once had, but the ones it currently operates are in the places that matter, as far as its target clientele is concerned.

Building the world's retail bank. Widely recognized as "the world's local bank," HSBC has the edge in attracting U.S. immigrants and expatriates alike.

Just as U.S. immigrants and world travelers visit the U.S. and set up accounts with HSBC because it's a name they know, Americans can travel abroad and find a retail banking name they recognize in HSBC.

The bank's expanded online banking focus and tech-forward philosophy help attract tech-savvy, upwardly-mobile international travelers.

Products like the HSBC Platinum Mastercard with no foreign transaction fees, for example, appeal to the affluent, globetrotting demographic.

HSBC pivots back to Asia and emphasizes a unified worldwide brand

The bank has a global history like no other, dating back to 1865 in Hong Kong and Shanghai.

It makes sense then that HSBC's growth should not just focus on foreigners in the U.S.

By pivoting to an Asian market focus, HSBC more than doubled its annual profits in 2017.

Protecting against U.S. volatility. With rising U.S. interest rates, more stringent borrowing requirements, and concern about U.S. investment banking, a pivot to Asia protects HSBC's profitability.

Reaching Asian hotspots for billions in profit. Asia provides more than half of HSBC's profit, and that success is not just concentrated in Hong Kong and Shanghai, where the bank has been a heavy hitter for more than a century.

Reaching into the Pearl River Delta area, which extends from Hong Kong into Shenzhen and Guangzhou on the mainland, HSBC increased profits to $4.6 billion in Q3, 2017.

That's an increase of $3.75 billion year-over-year.

Thinking Big While Honing in on Competencies

A targeted focus brings rapid growth

HSBC didn't take a scattershot approach to achieve its goals.

The bank sought out commercial customers in real estate and infrastructure markets.

It also increased staffing to better serve retail banking and wealth management customers as well as focus on deposits.

By honing in on two out of four competencies in the HSBC Group, the bank appealed to investors and regulators by demonstrating a clear focus and a solid strategy.

HSBC keeps thinking big. As the bank began its most recent restructuring with CEO John Flint—a renowned expert on Asian business and commerce—at the helm, HSBC set some hefty, measurable goals.

Among them: a return on equity of 10%.

But doesn't put a time frame on excellence. In the spirit of SpaceX entrepreneur Elon Musk, HSBC leaders deliberately did not set a time frame for the goal.

Still, having achieved an 8.2% return within the first three quarters of 2017, it is moving astonishingly quick in the right direction to reach its double-digit goal.

4 Key Lessons to Learn from HSBC

HSBC emerges from crises and learns from its mistakes

It's not enough to look at HSBC's reorganization and rise to success for inspiration.

If you're like me, you'd want to know how the company did it and how we can apply its philosophies to our own lives and businesses to achieve greatness ourselves over time, right?

Maybe we can't all leverage Chinese trade to amass wealth in the trillions.

But we can focus on customer value, streamline operations, stay on the cutting edge of technology, and find just the right niche to enhance growth in our own field.

(That's exactly what I've aspired to do with CreditLoan!)

You can learn more details and stories about HSBC's growth and think about how these lessons can apply to your life, too!

Lesson #1: Customer lifetime value is the most critical business growth metric

No matter what happens, you must continue delivering value to your customers.

They will remember you for it.

If you give folks more than what they expect, and develop a culture of trust, they will more readily forgive your transgressions, in case they happen.

Be "too big to fail." Why did HSBC not face criminal trials after money laundering violations and shuttling money through its banks to international drug cartels?

Despite the staggering amount it paid out, it still sounds unbelievable that the bank and its officials got away with a mere fine.

But HSBC has consistently made the list of banks that are "too big to fail."Total Operating Expenses of HSBC from 2008-2017

Headlines transformed the phrase into "too big to jail" following the trial on money laundering allegations.

That's because the world's governments and courts of law are aware of how deeply entrenched the bank is in the world's economy.

Basically, if HSBC were to crumble following a lawsuit, it could virtually cripple the international economy.

And that gives it a level of protection many lesser-known banks do not have.

But of course, it cannot be so brazen as to repeat its past mistakes and risk facing another billion-dollar fine.

Build brand recognition. Brand recognition is why companies spend billions of dollars on television, internet, mobile advertising, millions on social media campaigns, and untold amounts on billboards in Times Square and on Tokyo's streets (to name just a few).

The power of the HSBC brand does not just help attract new customers.

It gives it authority and the ability to bounce back after a crisis.

Customer lifetime value is everything. Brand recognition means less if you don't deliver on your promises.

Folks expect more from the world's biggest brands, and HSBC delivers on all fronts.

HSBC works to hook customers early.

The bank markets heavily to international college students seeking a safe and convenient place to put their money where they can reach it whether at home in their own country or at school in the U.S.

Then there are the easy loan applications, faster loan approvals, and top-notch online banking services that are just a few more customer benefits that HSBC provides.

And that's not to mention the value the bank gives its shareholders.

HSBC is always seeking ways to trim the fat and enhance profitability to increase the price of its stock—just as any publicly held company should do.

Customer satisfaction drives growth, too. In an interview with American Banker, HSBC's Pablo Sanchez says the U.S. division of the bank is growing faster than its peers.

It has realized more than 6% growth in its deposit base thanks to its emphasis on customer service and satisfaction.

Without growth, there's stagnation.

And you don't get to $2.5 trillion in assets by standing still.

Lesson #2: Fine-tuning your operations should be a constant and endless endeavor

The global banking superpower didn't just reorganize once and call it good.

Three major restructurings and constant evaluations of its business processes, markets, and focus areas since 2008 have put HSBC on a steady climb to the top.

Pinpoint (and obliterate) underperforming areas. Immediately following the mortgage crisis, HSBC offloaded hundreds of U.S. branches and underperforming properties to stay profitable without a government bailout.

Then it set its sights on international markets, including Mexico and South America.

Meanwhile, the bank also honed its focus onto four key banking areas to increase profitability.

Set your sights on the prize. Just as HSBC did, you have to set some goals to achieve.

Make sure your goals are challenging enough to be worth your effort and time. Just like when HSBC's leadership announced they'll be gunning for a 10% return on equity.

But see to it that these goals are measurable and attainable.

Once you have clarity on your goals, go and make a solid plan to achieve them.

Trim the excess. HSBC began by cutting non-profitable countries and regions, then branches and personnel.

Finally, the bank looked at its IT infrastructure, processes and productivity, and global functions.

These assessments enabled the bank to automate certain vital processes, allowing it to save time and money, while delivering an even higher level of customer service.

I call that a win-win; it's certainly something to aspire to!

Lesson #3: Don't be afraid of the cutting edge

One of the greatest lessons I've learned to date is that to be a leader in your field, you must actually be at the forefront and lead.

And HSBC has shown us that, in an industry like banking, this means staying on the cutting-edge of technology, online payment methods, and even currencies.

HSBC adopts new technology as proof-of-concept. HSBC, along with online banking giant ING Direct, stepped to the forefront of blockchain technology on May 14, 2018.

The two mega-banks spearheaded a blockchain transaction that exchanged bitcoin, a cryptocurrency, for a bulk shipment of soybeans from Argentina bound for Malaysia.

U.S. agriculture group Cargill was also involved in the world's first trade finance transaction using blockchain.

HSBC's transaction helped prove blockchain as a viable commercial trade solution. The monumental transaction helped established HSBC as a technology leader.

Vivek Ramachandran, HSBC's global head of innovation and growth for commercial banking, said in a statement that this represents "an inflection point for how trade is conducted."

It also notched yet another notable accomplishment in HSBC's already impressive history.

Years from now, the bank will be remembered for playing an instrumental role in the growth of bitcoin as a mainstream world currency.

Banking changes fast, and HSBC keeps pace. Digital security changes constantly.

Banks must consistently stay two steps ahead of cyber-thieves to maintain their reputation and consumer trust.

The blockchain transaction is just one example of HSBC working to speed up payments and increase the security of online transactions.

Helping transform the global economy. The historic blockchain transaction, experts say, will increase business liquidity.

It reduced the transaction time from five to 10 business days down to a scant 24 hours.

Now that's a real game-changer!

Lesson #4: You can't be everything to everyone

Prior to the mortgage crisis of 2008, HSBC was one of the world's biggest banks.

At the height of its success, the bank employed 350,000 individuals worldwide.

It attained this massive size through mergers and acquisitions.

Ultimately, it has grown its customer base to a massive 155 million in 2017.

But in the 21st century, that business model no longer works.

It came time for HSBC to pivot.

And the bank did so with agility to streamline its markets and operations, ultimately increasing profits.

Closing branches, increasing profits. Following the mortgage crisis, HSBC took the first steps toward streamlining its operations, shedding all its subprime mortgage operations.

HSBC closed 200 branches in the U.S. and even more worldwide.

Total Assets of HSBC from 2007-2017

These include branches and offices purchased from Beneficial and Household Financial, a famous subprime lender.

If there was one thing HSBC could no longer be in the midst of the mortgage crisis, it was a subprime lender.

Making more cuts. The cuts didn't stop with mortgage lending.

HSBC then evaluated its international and U.S.-based operations.

Following the Swiss bank scandal, when HSBC once again paid fines for charges of money laundering, the bank closed operations in several regions with high risk of financial crime.

Becoming lean, focusing on the green. Somewhere along the line, HSBC strayed from its roots as the world's local bank.

But by cutting branches and personnel, streamlining operations, and overhauling the online customer experience to become one of the best, HSBC transformed.

Today the bank focuses on its most dynamic, most profitable markets with the least financial risk, and continues to grow in revenue despite servicing fewer customers in fewer regions around the world.

Culture counts. Perhaps most importantly, HSBC has managed to retain a consistent corporate culture, staying on the cutting-edge of banking technology and delivering exemplary customer service across the world.

Build Upon Your Strengths Just Like HSBC

Although HSBC has the place names of Hongkong and Shanghai in its name, the financial institution has truly become "the world's local bank."

With almost 4,000 offices in both developed and emerging countries, HSBC continues to seek to be where the growth is.

It works to connect its clients to opportunities, and enables all sizes of businesses to thrive and entire industries to prosper.

And just like us here at CreditLoan, ultimately, the company's goal is to help people to find a better future and realize their aspirations.

Of course we know the company took a few wrong turns along the way that resulted in massive fines and losses.

But acquisitions, mergers, and (when appropriate) cuts, all played an important role in the restructuring of HSBC following its involvement in money laundering scandals involving Swiss corporations and drug cartels.

HSBC weathered the mortgage crisis to come out stronger than many of its peers, shredding its subprime lending business and honing its focus on profitable and efficient markets.

An emphasis on Asia—returning to the bank's roots—yielded growth in profits.

The recognizable brand attracts foreigners banking in America as well as Americans banking abroad—particularly the world's wealthy elite.

Not every organization has the tools, resources, or international reach to amass $2.5 trillion in assets.

But we can all learn something about customer service and business efficiency from HSBC's 153-year legacy.

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Have you ever banked with HSBC?

What were the benefits? Any drawbacks?

Any great tips (or nightmares) to share with the rest of us?

Let us know in the comments below!

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