HSBC’s Hong Kong fortress faces biggest threat from virtual banks

Bloomberg

HSBC Holdings Plc spent 150 years building a financial fortress around Hong Kong that touches nearly every aspect of life in the former British colony.
One of the bank’s biggest threats? A pack of upstart virtual lenders, which barely existed two months ago, backed by the likes of Standard Chartered Plc and Chinese internet insurer ZhongAn Online P&C Insurance Co.
Few if any of the world’s largest financial companies dominate a single market quite like HSBC does in Hong Kong, a city of 7.5 million people that accounted for roughly 60 percent of the bank’s pretax income in 2018. That makes HSBC a juicy target for the handful of “virtual” lenders vying to shake up the commercial hub’s banking market after securing first-of-their kind
approvals last month.
HSBC already offers digital services as well as maintains branches in Hong Kong, so clients can use whichever channel they want, a bank spokeswoman said by email. These include trade transactions through blockchain technology, while HSBC’s PayMe mobile wallet has more than 1.5 million users, she said.
The bank’s adjusted revenue from Hong Kong rose 14 percent last year, the spokeswoman said, and it hired additional staff in the Hong Kong-China region.
HSBC, which owns about 60 percent of subsidiary Hang Seng Bank Ltd., has the biggest share across all major banking businesses in Hong Kong, according to an analysis by Goldman Sachs Group Inc. It’s also been the city’s biggest mortgage lender in the secondary market for the past two years, data from Centaline Mortgage Broker Ltd. show.
One of the three note-issuing banks in Hong Kong, HSBC dominates revenue share in the city — more, if one includes Hang Seng Bank.
Pretax profit at the London-based lender as a share of Hong Kong’s gross domestic product dwarfs the same ratio at rest of the world’s biggest banks, data compiled by Bloomberg show.