Ratings agency Fitch has warned that HSBC risks having its credit downgraded over its new strategy revealed this week.
HSBC is looking to cut $5bn (£3.25bn) through a number of initiatives, including cutting around 25,000 jobs. It is also exiting Turkey and reducing its operations in Brazil, and planning to focus more energy and resources building its Asian division.
But Fitch, which currently has HSBC on AA- said this pivot was “unlikely to have a positive rating effect while being potentially negative over the long run”
“In particular, how HSBC manages its significant planned growth in China and south-east Asia could hurt the ratings if this leads to a higher overall risk profile and concentration,” the agecny explained.
Cost cutting and capital relocation would only boost credit ratings if HSBC outperformed on its targets “and at the same time boosts capitalisation signficantly”.
“Extracting more value from its global network and from increasing the share of international client revenues - which it quantified at $22bn or 40 per cent of revenues in 2014 - would be positive for HSBC, but there are few details as yet as to how this will be measured and accomplished,” it added. “In this regard, the bank emphasised that maintaining a substantial US presence is most critical for its transaction banking operations which generated revenue of $16bn in in 2014.”