Establishment and early years

8/7/2019 Establishment and early years

1/13

Establishment and early years

HSBC is named after its founding member, The Hongkong and Shanghai BankingCorporation Limited, which was established in 1865 to finance the growing trade

between Europe, India and China.The inspiration behind the founding of the bank was Thomas Sutherland, a Scot whowas then working for the Peninsular and Oriental Steam Navigation Company. Herealised that there was considerable demand for local banking facilities in Hong Kongand on the China coast and he helped to establish the bank which opened in Hong Kongin March 1865 and in Shanghai a month later.Soon after its formation the bank began opening branches to expand the services itcould offer customers. Although that network reached as far as Europe and NorthAmerica, the emphasis was on building up representation in China and the rest of theAsia-Pacific region. HSBC was a pioneer of modern banking practices in a number ofcountries - for instance, in 1888 it was the first bank to be established in Thailand,where it printed the countrys first banknotes.

From the outset trade finance was a strong feature of the local and internationalbusiness of the bank, an expertise that has been recognised throughout its history.Bullion, exchange, merchant banking and note issuing also played an important part. In1874 the bank handled China's first public loan and thereafter issued most of China'spublic loans.By the end of the century, after a strong period of growth and success under theleadership of Thomas Jackson (chief manager for most of that period from 1876 to1902), the bank was the foremost financial institution in Asia.

Challenges and changeThe twentieth century saw challenges and change for HSBC. In the early years of thetwentieth century, HSBC widened the scope of its activities in the East. It becameincreasingly involved in the issuing of loans to national governments, especially inChina, to finance modernisation and internal infrastructure projects such as railwaybuilding. The First World War brought disruption and dislocation to many businessesbut the 1920s saw a return to prosperity in the East as new industries were developedand trade in commodities such as rubber and tin soared. The bank's new head office in


2/13

Hong Kong (1935) and the new buildings at major branches such as Bangkok (1921),Manila (1922) and Shanghai (1923) reflected this confidence.The 1930s ushered in an era of uncertainty with economic recession and politicalturmoil in the many of the bank's markets. In the Second World War, the majority of thebank's staff in the East became prisoners of war as the enemy advanced through Asia.

The bank survived under the new leadership of Arthur Morse, and through its prudentpolicy of building up large reserves in peace time. At the end of the War, HSBC took on akey role in the reconstruction of the Hong Kong economy. Its support for the skills ofnewcomers to Hong Kong was especially vital to the upsurge in manufacturing in thisperiod.

In other markets, however, HSBC needed to make major readjustments. Most of themainland offices in China were closed between 1949 and 1955, leaving only theShanghai office to continue its long and eventful service. These changes carried the riskthat the bank was over-concentrating its interests in Hong Kong. The bank addressedthis concern by diversifying through a series of alliances and acquisitions. Thepurchases of the Mercantile Bank and the British Bank of the Middle East in 1959 took

HSBC into new pastures, and the formation of a merchant banking arm in 1972extended its range of services. By the 1970s the bank had firmly developed a policy ofexpansion by acquisition or formation of subsidiaries with their own identities andexpertise.

Making of the modern HSBC

In the later years of the twentieth century HSBC moved from an important regionalbank to one of the world's leading financial services organisations. This transition was

achieved by a number of steps.By the late 1970s HSBC's management had conceived the strategy of the 'three leggedstool' with the legs of the stool representing the three markets of the Asia Pacific region,the US and the UK. In the 1980s, the purchase of Marine Midland Bank in the USrepresented the acquisition of the second leg of the stool. HSBC then sought a similarpurchase in the UK. The initial target was the Royal Bank of Scotland but after thisacquisition failed, attention turned to Midland Bank and a 14.9% stake was taken in1987. After creating a new holding company, HSBC Holdings plc in 1991, HSBC thenmade a recommended offer for full ownership of Midland in July 1992. The third leg wasin place. As a result of the formation of the new holding company and the acquisition ofMidland Bank, HSBC became headquartered in London.

HSBC has travelled a long way since its beginning - from a small local bank to the

World's Local Bank.


3/13

HSBC INDIA

HSBC's origins in India date back to 1853, when the Mercantile Bank of India was

established in Mumbai. The Bank has since, steadily grown in reach and service

offerings, keeping pace with the evolving banking and financial needs of its customers.

In India, the Bank offers a comprehensive suite of world-class products and services to

its corporate and commercial banking clients as also to a fast growing personal banking

customer base.

The antecedents of the HSBC Group in India can be traced back to October 1853 when

the Mercantile Bank of India, London and China was founded in Bombay (now Mumbai).

Starting with an authorised capital of Rs 5 million, the Mercantile Bank soon opened

offices in London, Madras(Chennai), Colombo and Kandy, followed by Calcutta(Kolkata),

Singapore, Hong Kong, Canton(Guangchow) and Shanghai by 1855. The following

hundred years were in many ways propitious for the Mercantile Bank. In 1950 it moved

into its new head office building in Mumbai.at Flora Fountain.


4/13

FUTURE PLAN (HSBC: We are the world's local bank)

y Largest international emerging markets banky

Widespread international networky Uniquely cosmopolitan customer basey Considerable financial strength

Four key businesses

HSBC has four key businesses:

Global Banking and Markets:emerging markets-led and financing focusedwholesale bank

Positioning for the next wave of

global growth

Private Banking:a world leading international private bankintegrated into a unique distribution network

Building on intra-Group referrals

Commercial Banking:the leading international business bank and bestsmall business bank

Strengthening international links

Personal Finance Services:use our global scale and local knowledge togrow profitably in selected markets

We will use the business models,which give us a 'right to win'

Alignment of presence with global trends

HSBC's strategy is aligned with three trends which are shaping the global economy1. Emerging markets are growing faster than developed countries2. World trade is expanding faster than GDP3. Longevity is increasing virtually everywhere


5/13

HSBC POSITION

HSBC shows strength of Asian roots

There is, of course, a global financial crisis which therefore has affects on all major

financial institutions. It is entirely correct for the left to point out the consequences of

this and criticise policies that have led to it.

But it is also important to be accurate and to avoid exaggeration. The degree of accuracy

in analysing the situation, and the practical conclusions that flow from this, not the

degree of heat in rhetoric, or of hyperbole, is the touchstone of any policy - including

any socialist one.

In the recent turmoil a number of US and British banks have collapsed either completely

or essentially and have had to be taken over by the state or liquidated - Lehman

Brothers, AIG, Fannie Mae and Freddie Mac, Northern Rock, Bradford and Bingley. A

number of other institutions have declined to the point where they had to be taken over

in order to prevent collapse - Merrill Lynch, HBOS. Others are in a deeply depressed

financial state to the point where collapse may potentially threaten - RBS falls in thiscategory.

However other financial institutions have suffered no damage on a scale that threatens

their viability. In terms of the scale of its importance in the UK the most obvious

example of this is HSBC.

HSBC has suffered no uncontrollable losses and as may be seen from the graph below no

substantial fall in HSBC shares has occurred at all.

This is not remotely a marginal case. In terms of market capitalisationHSBC totally

dwarfs 'British' competitors - at the close of the London Stock Exchange on 8 October

the market capitalisation of HSBC was 105.9 bn compared to Barclays 23.3 bn,

Standard Chartered's16.5 billion, RBS's 15.1 billion, Lloyds TSB's 12.7 billion,

andHBOS's 6.2 billion [1]

The reason for HSBC's strength, of course, is that it is in origin and much of its


6/13

operations an Asian bank. Its origin is the Hong Kong and Shanghai Banking

Corporation.

HSBC's strength shows one of the key features of the present international situation -

the way the centre of economic gravity is shifting to Asia. But HSBC's strength should

remind the left that while it is entirely correct in general to speak of a 'financial crisis'

this does not remotely apply to every institution and precise analysis, not overblown

rhetoric, is called for.

MARKET SHARE


7/13

Present Share Information

CORE AREA OFOPERATION

What Is Operations Support

Banking Operations Support comprises of four sections, namely Operations Design &Development (ODD), Enterprise Six Sigma (ESS), HSBC Universal Banking (HUB) andNetwork Operation Support (NOS).

In brief, the respective sections are in charge of the following:

y ODD: manages outsourcing, organisation restructuring, centralisation and processimprovement

y Six Sigma: drives total service quality initiative and manage strategic projectsy HUB: manages implementation of HUB core projects and local amendmentsy NOS: manages independent service providers, co-ordinate Central Bank and other

regulatory requirements/initiatives


8/13

Operations Design & Development (ODD)

ODD looks into enhancing internal and external customer service, optimising costefficiency through business process reengineering, centralisation/regionalisation of

backroom activities, outsourcing of non-core operations, introducing new systems andprocedures and implementation of Quality Management Methodology, while ensuringthat the competitive advantage is maintained and continuously improved upon.

ODD also leads cross-functional team and the success rest on the ability to developeffective partnership at all levels and maximum buy-in. ODD always demonstrate firstclass problem solving, coupled with a keen business sense and the ability to challengethe status quo.

All requests for re-organisation, re-structuring or creation of new departments need tobe evaluated by ODD to ensure that the reporting structure, span of control and issueson productivity and workload management are considered in a consistent manner.

Enterprise Six Sigma (ESS)

The Enterprise Six Sigma (ESS) team is responsible for driving Total Service Qualityinitiatives and advocating Six Sigma methodology as a business management approachto support low cost/high quality service to improve productivity and profitability and tofacilitate growth. The ESS team is also responsible for managing strategic qualitymanagement projects aimed at influencing organisational change, exceeding customerexpectations and differentiating HSBC from the competition.

The ESS team provides focus to the Total Service Quality (Six Sigma) thrust, to

effectively support the business functions, customer groups and branches. In providingconsultation on quality related and key business issues, the ESS team liaises and workvery closely with MYH Senior Management, Function Heads and Line Management andbranches. Professionals with a high degree of problem solving ability, analytical, projectmanagement, effective communication, planning, organising skills and a strongcommercial orientation can expect to find great challenges in this area.

NetworkOperations Support (NOS)

NOS is responsible in delivering professional and consistent high quality and effectivevalue added operational support services and advice on all operational aspects to the

Business Groups, MYH functions and the branch network. They are also responsible formanaging and controlling all service providers in HBMY and taking ownership of theestablished operational procedures and group policies and re-writing of operationalprocedures in support of efficiency improvements in tandem with new initiativesthrough Six Sigma, Centralisation and new/enhanced products/services launch.

NOS consistently deliver efficient and effective value added advice or support onoperational matters covering all operational and control procedures,regulatory/compliance requirements to all branches and departments and also securing


9/13

tangible benefits and upholding the Banks interest through representation andpersonal contacts with local regulators and at public forum.

NOS also co-ordinates and implements Bank Negara Malaysia (BNM)/Association ofBank Malaysia (ABM) and other regulatory requirements in the most effective and cost-

efficient manner. It also cultivates positive relationships and enhances the Bank's imagewith BNM, local regulators and the Banking fraternity.

HSBCUniversal Banking (HUB)

HUB is a package of banking systems which consists of many modules to support allcommercial banking products: deposits, loans, inward/outward remittances (MessageAutomation), imports/exports, returns, nostro account reconciliation, general ledger,income/expenditure, auto funds transfer (Standing instruction and Autopay), retailexchange contracts, marketing, links to Hexagon, Swift/IST, ATM, Internet Banking,Telephone Banking and administration.

HUB system is a complex series of system, which is further complicated by the need tomaintain group standards and local requirements in areas of operations. The controls ofthe HUB system are managed through various set of parameters.

HUB manages and implements the Groups projects and provides consultation servicesto the business on local enhancement requirements to meet business needs. HUBsresponsibility involves planning, co-ordinating and liaising with group entities,especially Hong Kong and Canada on projects and HUB related issues. It covers allaspects of project management, including planning, managing, co-ordinating andliaising with various departments to oversee the successful completion of tasks, e.g.development of user requirements and procedures, acceptance tests, training

programmes, simulations, pilot roll out and national rollout of core projects. They areresponsible for the full testing of systems and provide ongoing effective HUB support tobranches/MYH departments.

HUB manages multiple projects with limited resource to produce test plans, design anddocument procedures, produce implementation plans and schedules, produce localamendment specifications to cater to local requirements and lead/manage/direct thesuccessful installation of these systems within plan, schedule and budget. They workclosely with Group entities, Information Technology, Learning and Development andother function departments and branches/ user departments to ensure follow-up actionon user queries/problems and audit standards are maintained.

Another challenge is to successfully educate the key staff at branches and to overcomeany objections and resistance they may have.

MOST IMPORTANT ACTIVITIES OF HSBC

02 Mar HSBC Trinkaus & Burkhardt Ag 2010 Preliminary Results


10/13

2011 In its 225th year, HSBC Trinkaus reported its strongest results in the bank's

history.

01 Mar

2011

Grupo Financiero HSBC SA de CV Fourth Quarter 2010 financial results -highlights

Net income before taxes and undistributed profits of subsidiaries for the yearended 31 December 2010 was MXN1,106 million, an increase of MXN972million or 725.4 per cent compared with MXN134 million in 2009.

28 Feb2011

HSBC Seguros (Brasil) S.A. 2010 Annual Results - highlightsNet profit for the year ended 31 December 2010 was BRL320m, an increase ofBRL59m compared to BRL261m in 2009.

28 Feb2011

HSBC Holdings plc 2010 Annual ResultsHSBC Holdings plc 2010 Annual Results

25 Feb

2011

Greater China regulation and policy expert joins HSBC boardLaura May Lung Cha (61) has been appointed a Director of HSBC Holdings plcwith effect from 1 March 2011.

23 Feb2011

HSBC Bank Canada results for the fourth quarter and year ended 31 December2010 - highlightsReported net income attributable to common shares was C$104 million for thequarter ended 31 December 2010

10 Dec

2010

HSBC names Global Banking and Markets top team

23 Sep

2010

HSBC hires new Global Head of Credit Trading for Global Markets

25 Aug

2010

HSBC builds Asian Equity Team to drive business growth

23 Aug

2010

HSBC strengthens Global Foreign Exchange Team in Asia-Pacific

09 Aug

2010

HSBC beefs up Resources and Energy Group in Asia-Pacific

09 Aug

2010

HSBC Securities Services appoints new Head of Middle East and Africa

23 Jul

2010

HSBC establishes strategic alliance in energy trading with TOTSA

09 Jul HSBC named Best Emerging Markets Bank of the Year by Euromoney


11/13

2010

28 Jun

2010

HSBC launches Emerging Markets Outperformance strategy

21 Apr

2010

HSBC announces senior appointment for Global Banking

01 Apr

2010

HSBC announces senior appointments for Global Research

23 Mar

2010

HSBC announces senior appointment for Equity Capital Markets

02 Mar

2010

HSBC hires new Global Head of Equity Capital Markets

25 Feb

2010

HSBC announces senior appointment for Islamic Finance in Global Markets

18 Feb

2010

Awards - Leading financial publications recognise HSBC in Asia-Pacific

25 Jan

2010

HSBC appoints Anita Fung as Head of Global Banking and Markets, Asia-

Pacific

MILESTONES ACHIEVED

Date Award

February 2011

Euroweek Syndicated Loan and Leveraged Finance Asia Awards 2010Euroweek Syndicated Loans and Leveraged Finance Awards 2010Asiamoney Best Country Deals 2010GTR Best Deals of 2010Euromoney Islamic Finance Awards 2011The Asset Triple A Regional Awards 2010Euromoney Deals of the Year 2010EMEA Finance - Achievement Awards 2010


12/13

January2011

Risk awards 2011Latin Finance Deals of the Year 2010Islamic Finance News Deals of the Year 2010

December2010

Acquisitions Monthly Awards 2010IFR Awards 2010

IFR Asia Awards 2010Financial Times and Mergermarket European M&A Awards2010emeafinance Middle East Banking Awards 2010PFI Awards 2010Finance Asia Achievement Awards 2010Asiamoney Regional Awards 2010Financial News Awards for Excellence in InvestmentBanking,Europe 2010Credit Magazine Deals of the Year 2010

November2010

The Asset Country Awards 2010FX Week Best Banks Awards 2010

October 2010 Covered Bond Awards 2010The Banker Investment Banking Awards 2010

July 2010 GSL - The Securities Lending Industry Awards 2010Credit Awards 2010Euromoney Awards for Excellence 2010

Best Global Emerging Markets BankBest Global Emerging Markets Debt HouseBest Global Sovereign Advisory HouseBest Global Wealth Management House

June 2010 Finance Asia Country Awards 2010Euromoney Primary Debt Poll 2010The Asset AAA Islamic Finance Awards 2010Investment Research Survey 2010Asia Risk Corporate Rankings 2010AsiamoneyBest Bank Award 2010


13/13

May 2010 AsiamoneyStructured Products Poll 2010EuroWeekBond Market Awards 2010

April 2010 The Banker, Deals of the Year 2010

March 2010 EMEA Project Finance Awards 2009Infrastructure JournalAwards 2009Trade Finance magazine Deals of the Year 2009

Project Finance magazine Deals of the Year 2009InstitutionalInvestorEmerging EMEA poll 2010

February 2010 EMEA Finance - Achievement Awards 2009Trade & Forfaiting - Deals of the year 2009Euromoney Islamic Finance Awards 2010EuroweekLoan Awards 2009EuroweekAsia Polls 2009EuroweekAsia Pacific Loan Awards 2009EuroweekAsian Currency Bond Awards 2009Energy Risk commodity rankings 2010The Treasurer Deals of the Year 2009Euromoney Deals of the Year 2009

Documents

Establishment and early years