HSBC share price closes higher as it launches review into leaving UK

 
Emma Haslett
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Flint said the requirement to ring-fence its banks could push it out of the UK (Source: Getty)

Shares in HSBC closed more than three per cent up at 631.4p after the bank revealed it is investigating the possibility of leaving the UK.

Chairman Douglas Flint said this morning that, spooked by a tighter regulatory environment, HSBC's board has launched a review into moving its headquarters out of the UK.

More on this story: Five charts showing why HSBC might actually mean it this time

In a speech at its annual general meeting (AGM) in Westminster today, Flint added: "It is essential that we position HSBC in the best way to support the markets and customer bases critical to our future success."

"In this regard, we also have to take fully into account the repositioning of our industry being driven by the regulatory and structural reforms which have been put in place post crisis... We are beginning to see the final shape of regulation and of structural reform, including the requirement to ring fence in the UK.

"As part of the broader strategic review taking place, the board has therefore now asked management to commence work to look at where the best place is for HSBC to be heaquartered in this new environment. The question is a complex one and it is too soon to say how long this will take or what the conclusion will be; but the word is underway"

Although Hong Kong has been mooted as the new location for its headquarters, IG senior market analyst Chris Beauchamp suggested making the move might be easier said than done.

Given the titanic size of its balance sheet there are few economies that could bear the load. Instead the bank is merely opening the batting on further discussions regarding the UK’s bank levy, with the threat to up sticks a means of applying somewhat unsubtle pressure on the British government.

The bank has also complained about ring-fencing rules. Under new measures due to be set out by the Prudential Regulation Authority (PRA), banks are likely to be told to separate their "core" retail and business banking arms from their corporate and investment divisions by the beginning of 2019.

In March, HSBC announced plans to headquarter its ring-fenced bank in Birmingham, with 1,000 head office roles due to be moved from its Canary Wharf offices.

Chief executive Stuart Gulliver has been a vocal critic of ring-fencing, saying in August last year they will cost HSBC "hundreds of millions of pounds" a year.

The bank also criticised increasingly tight regulations, saying staff were under "unprecedented pressure", and that it spends between $750m (£495m) and $800m a year on its compliance and risk programme, an increase of $150m-$250m on the year before.

Any departure by the bank would be a huge loss to the UK. With a value of £120bn, HSBC is the FTSE 100's largest company by market cap, employing 47,500 people in the UK.

However, the regulatory environment looks set to get even tougher for UK banks after the election. While the Conservatives have vowed to push ahead with a bank levy, which is due to raise £3bn next year, Labour and the Liberal Democrats have both pushed to raise it even higher.

HSBC has itself been heavily scrutinised in recent months, with Gulliver called to answer questions - including some on his own tax affairs - from MPs on both the Public Accounts Committee and the Treasury Select Committee after its Swiss private banking arm was accused of helping thousands of customers evade tax.

At the time, Gulliver was urged to resign by those questioning him.

"How can I as an HSBC client have confidence in someone like you?" asked Public Accounts Committee chair and Labour politician Margaret Hodge.

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