HONG KONG  - HSBC  is on a tightrope it will struggle to walk. Hong Kong demonstrators vandalized bank branches after police froze an account used to pay their legal fees. In the first nine months of 2019, HSBC earned over half of its $18 billion in pre-tax profit in the city, but six months of violent protests have set off a recession. Now some protesters are calling for a boycott. With Beijing on his back, interim boss Noel Quinn has few good options.

New Year’s Day saw HSBC cash machines attacked, while the iconic bronze lions that guard its headquarters were covered in spray-paint, doused in flammable fluid, and set alight. Protesters have already targeted the local branches of mainland financial institutions; they turned on HSBC after an account held by a group called Spark Alliance, which helps pay their legal costs, was closed, and four group members were arrested on money laundering charges.

HSBC said it closed the account on customer request. Still, Quinn, trying to protect and expand his mainland footprint, must maintain good relations with Beijing, and the Chinese government insists that the protests are driven, and funded, by foreign agents. HSBC fell out of the government’s good graces in 2018, after it cooperated with a U.S. investigation into telecoms giant Huawei that resulted in its chief financial officer Meng Wanzhou being detained in Canada. HSBC cannot afford to be seen siding with the protesters now.

On the other hand, many demonstrators are probably customers too. The bank is the biggest provider of retail accounts, credit cards and mortgages in Hong Kong. Companies and citizens in the city entrust it with $487 billion of deposits, 35% of HSBC’s global accounts; it accounts for nearly a third of the $415 billion of personal loans the bank had on its books in September. Rivals like Standard Chartered and Bank of East Asia could exploit HSBC’s current unpopularity to poach business, even as the bank struggles to revive performance in North America and Europe.

It will be difficult, if not impossible, to simultaneously appease Beijing and the local citizens who fear and resent mainland authorities. Like many other local companies, the $160 billion lender has little choice but to hope things blow over.

 

CONTEXT NEWS

- On Jan. 1 protesters vandalized HSBC branches and cash machines in Hong Kong during violent anti-government demonstrations which have been ongoing since June.

- On Dec. 19, officers froze HK$70 million ($9 million) in bank deposits held by the Spark Alliance, an organisation launched in 2016 to help protesters with legal fees and the like. Police said they arrested four people for suspected “money laundering”, according to a statement.

- HSBC has denied any link between the police crackdown on Spark Alliance and the closure of that organisation’s account at HSBC, saying it was done following direct instruction from the customer. Some demonstrators have called for a boycott of the bank over the move.

 

(Editing by Pete Sweeney and Katrina Hamlin) ((alec.macfarlane@thomsonreuters.com; Reuters Messaging: alec.macfarlane.thomsonreuters.com@reuters.net))