The FINANCIAL — HSBC is leaving the Georgian retail banking sector.
A full withdrawal from the country is expected by early 2012. “In Georgia we have limited size and scale and, despite considerable efforts in the country, we feel now is the right time to withdraw from the market. We’ve informed the regulator and our employees, and will be informing our consumers as we work towards securing a smooth exit,” said Guy Lewis, the CEO of HSBC Bank Georgia. Experts believe this will not influence the investment climate in Georgia.
HSBC, which is one of the largest financial institutions in the world, has limited its operations in Russia as well. In April 2011, the bank said in a statement that its "strongest opportunity" in the eastern European country would be in the corporate banking sector. It was then reported that HSBC decided to leave retail banking.
Barclays cited similar reasons when it announced its move away from Russia's retail banking sector.
"It's a difficult market in Russia. You can't just come in and say, 'I'm HSBC,'" an executive at a rival Russian bank said.
As HSBC officials explain, the decision to exit Georgia is following a strategic review. The officials don’t go deeper and don’t explain more clearly the reasons for the exit. Until its full withdrawal, HSBC is committed to ensuring a smooth transition to a new banking provider for existing customers.
HSBC Bank Georgia was one of the largest banking and financial institutions and members of the HSBC Group. The bank started operations in Georgia in June, 2008. The HSBC Corporate Bank in Georgia worked with local and international businesses offering corporate, international trade finance and treasury services.
HSBC have representation in almost every country with which Georgia has trade relations. Therefore the bank could play a big role in those companies which are involved in international trade activities.
HSBC holdings plc of the HSBC Group, the founder of the company, has its headquarters in London. The group serves customers worldwide from offices in 85 countries and approximately 7,500 in Europe, Asia, Latin America and Africa areas. HSBC Holding has shares registered in the London, Hong-Kong, New York, Paris and Bermuda stock exchanges, and has approximately 200,000 shareholders distributed around the world in 100 countries.
Last week it became known that HSBC is cutting about 3,000 jobs in Hong Kong over the next three years as the first step in its aggressive cost-cutting plan in five countries, a top official has announced.
Experts say that the withdrawal of international bank from Georgia won’t be negative for the country and it won’t impact badly on the Georgian banking market.
”HSBC was playing a very leading role here in Georgia,” Guy de Fontgaland, president of Eurasia Management House commented. “I would think that top businesses have to recount the national banks: Bank of Georgia, Republic bank, TBC bank etc. The fact that HSBC also confined the activities of cooperative clients and perhaps the fact that they didn’t have a sufficient market among the cooperative clients probably means that the bank wasn’t supported. Maybe, it wasn’t profitable for the bank to work here as it would be expensive for it.
They are trying to get a total of within 5,000 or 6,000 employees. The fact that they are cutting back is to conserve cash to increase a profit,” he said.
Guy de Fontgaland thinks that the results of HSBC’s exit won’t be harmful for the local banking market. “It is always good for the country to have an international bank. But because of the small size of its market, I would probably say that Georgia still isn’t ready to get such big banks in its market. Maybe HSBC felt that there is no need in Georgia’s market for business because Georgia is still such a small player in the global economy,” added Fontgaland.
“HSBC is consolidating its operations under new leadership and will move out of Georgia and Russia. This should not be taken as a negative for Georgia as the banking sector here is continuing to grow,” said David Lee, the president of the American Chamber of Commerce in Georgia. “I am sure that we will see HSBC back here soon, together with other international banking brands as the economy of Georgia recovers from the world-wide financial crisis,” he added.
Michael Cowgill, President of the Georgian American University said that HSBC was an excellent member of AmCham. “We are all truly sad to see a brand such as HSBC leave Georgia. HSBC is one of the world’s leading banks and it attracted many clients that wanted the additional security that comes from it being such a global player. Although we never like to see such a well-respected bank (and employer) leave, I believe we will experience few if any negative consequences from its exit from Georgia,” said Cowgill.
“From what I have read, HSBC leaving Georgia and also Russia was just a business decision based on the new CEO's policy to optimize the bank's operations and concentrate on big developing markets (India, Turkey etc.) where they are already well established.
However, we do have a very robust and competitive banking sector in Georgia – and many of those banks have strong international ties and ownership. I would expect that most, if not all, of HSBC’s customers will move to other Georgian banks,” added Cowgill.
In total, 19 commercial banks are operating in Georgia. Among them there are nine foreign banks: Societe Generale Group, Privat Bank, VTB Bank, Procredit Bank, BTA Bank, The International Bank of Azerbaijan-Georgia, Ziraat Bank A.S., HSBC Bank-Georgia and Halyk Bank Georgia.
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