Bank / Credit Union

HSBC to revamp business model

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October 28, 2020

Hong Kong-based HSBC Holdings is launching and overhaul of its business model, seeking to change its main source of income from interest rate to fee-based businesses.

Reporting a 35% drop in quarterly profits, HSBC also accelerated plans to shrink it's company by instituting deeper cost cuts, and declaring it would resume conservative dividend payments when it was able, according to a report from Reuters.

The bank's plans to change its business model is one of the biggest shifts in strategy to date from HSBC, which has long rested on its ability to generate interest income from more than $1.5 trillion in customer deposits.

But with interest rates worldwide now rock bottom and in some cases turning to the negative, the bank is charging borrowers more for loans than it pays out to depositors.

Earlier this year the bank announced plans to merge its wealth and personal banking business in an effort to cross-sell more lucrative products across a wider section of its customer base. Now it's sending sending signs it may start charging for more basic products such as standard accounts that customers expect to be free.

It will also look at how it can bring in more fees from corporate customers, having done well helping clients raise money through bond and equity financing during the COVID-19 crisis.

"We will have to look at charging for basic banking services in some markets, because a large number of our customers in this environment will be losing us money," Ewen Stevenson, CFO for HSBC, said in the report.