Why Is HSBC Planning the Biggest Investment Banking Retrenchment in Decades?

HSBC is making headlines for all the wrong reasons, at least if you’re an investment banker in the West. The British banking giant is tapping out of mergers and acquisitions (M&A) advisory and some equity businesses in the U.S., UK, and parts of Europe. It’s the biggest retreat from investment banking it’s made in decades. But what’s the deal? And what does it mean for the future of finance? Let’s break it down.

Slashing the West, Betting on the East

This isn’t just about saving a few bucks, it’s a bold bet on Asia, where HSBC already makes most of its money. CEO Georges Elhedery, who took over in 2024, is ditching what’s not working and doubling down on high-growth regions. Here’s why HSBC is bouncing from Western investment banking:

• Asia’s Boom vs. the West’s Slump: The banking giant has deep roots in Hong Kong, China, and Southeast Asia are paying off. In 1H 2024, it made $6.21B from Hong Kong, $1.91B from China, and $798M from India, while overall revenue growth was just 1%, showing the West isn’t pulling its weight.
• Bleeding Money in M&A: HSBC’s M&A advisory in the West has struggled to secure big deals and fat fees. Analyst Gary Greenwood put it bluntly: “I’ve lost count of how many times HSBC has been in and out of ECM in the UK. It never succeeds.”
• Regulatory Headaches: Tougher banking rules in the U.S. and UK mean more compliance costs and shrinking profits.
• $3 Billion in Cost Savings: HSBC is eyeing at least $3 billion in cost savings, and slashing M&A and equity businesses is a fast way to get there.
• Long-Term Struggles: HSBC has never been a major investment banking player in the West. In 2024, it ranked 14th globally in IB fees with only 1.5% market share, mostly from debt financing.

What’s Changing?

This isn’t a full exit from investment banking, but here’s what’s going down:

• No More M&A Advisory in the West: No more corporate dealmaking advice in the U.S., UK, or Europe. That’s a major shake-up.
• Scaling Back Equities: HSBC is cutting back its equity capital markets (ECM) business and saying goodbye to equity research and trading in some Western markets.
• Asia Gets the Love: The bank is shifting resources to Asia and the Middle East, ramping up investment banking and wealth management where it sees the most growth.
• Debt Capital Markets: HSBC isn’t ditching everything, it’s keeping its debt financing and leveraged finance businesses worldwide.

A Larger Trend

HSBC isn’t the only one throwing in the towel. Other European banks have been bailing on investment banking, too:

• Deutsche Bank walked away from equities trading after years of losses.
• UBS cut back its trading operations to focus on wealth management.
• Credit Suisse tried to restructure but still couldn’t stay afloat before merging with UBS.

The reality is that investment banking has become an expensive game that many European banks are choosing to exit, leaving U.S. giants like Goldman Sachs and JPMorgan to dominate the space.

The Aftermath of HSBC’s Decision

The retrenchment will likely lead to significant layoffs across its M&A advisory and equity divisions. While the exact number of job cuts hasn’t been officially disclosed, sources estimate it could affect hundreds of employees, particularly in London and New York.  The decision will affect investment bankers specializing in M&A and ECM in the U.S. and Europe, along with traders, analysts in equity research, and support staff in these divisions. While some may be reassigned to Asia-focused roles, many are expected to join rival banks to expand their investment banking services. Others may transition to private equity, fintech, or corporate finance.

Banking’s New Reality

HSBC’s shake-up screams one thing—Asia is where the action is. With China, India, and Southeast Asia booming, banks are betting big on the East. Meanwhile, traditional investment banking in the West is hitting rough waters—rising rates, tighter regs, and economic jitters are making it a tough game, especially for mid-tier players. Expect more cost-cutting across the board, with banks axing non-essentials. Plus, deal-making isn’t what it used to be—M&A is slowing, and companies are playing it safe. The takeaway? The investment banking landscape is shifting fast, and only the nimblest players will thrive.

What It Means for You

If you work in finance, here’s what you should take away from HSBC’s move:

• Know When to Pivot: HSBC’s decision shows the importance of adjusting strategy when markets shift.
• Watch the Bottom Line: Trimming down on money-losing divisions can keep companies profitable.
• Relationships Are Everything: HSBC struggled in Western investment banking partly because it didn’t build strong client ties like its U.S. rivals did. In finance, connections make all the difference.
• Risk-Proof Your Career: Global markets are unpredictable. Finance professionals should stay ahead of trends and be ready to adapt.
• Follow the Money: Banks are pivoting toward regions with more growth. Keep an eye on where the opportunities are opening up next.

Smart Move or Bad Call?

HSBC’s exit marks a major shift in investment banking. It’s betting big on Asia while scaling back in the West, and the financial world is watching closely. Will other banks follow suit? What happens to the talent being left behind? And will HSBC regret pulling back just as capital markets look poised for a rebound? One thing’s for sure finance is changing fast, and HSBC’s move is just the latest sign that the industry is heading into a whole new era. Stay informed and inspired—subscribe to our newsletter for fresh insights and updates delivered straight to your inbox!