StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...
Free

HSBC Canada Investment Proposal - Report Example

Cite this document
Summary
This report "HSBC Canada Investment Proposal" provides an analysis of HSBC Canada, citing the history of the bank, its current history and situation and the nature of competition in the market the bank operates. It delves into the advantages and the challenges that HSBC Canada has…
Download full paper File format: .doc, available for editing
GRAB THE BEST PAPER95.3% of users find it useful
HSBC Canada Investment Proposal
Read Text Preview

Extract of sample "HSBC Canada Investment Proposal"

Business information assignment- HSBC Canada Investment proposal Grade (February 2nd, Memo Janet Wu From: Alexander Subject: HSBC Canada Investment proposal This report provides an analysis of HSBC Canada, citing the history of the bank, its current history and situation and the nature of competition in the market the bank operates. Further, the report delves into the advantages and the challenges that HSBC Canada has in the Canadian market, while also assessing its future prospects in the market. This report is meant to assist interested parties in understanding HSBC Canada as an institution, and therefore make the necessary decisions regarding investments or further association with the institution. Business information assignment- HSBC Canada Investment proposal Introduction HSBC Canada is a banking institution operating in Canada, as a branch of the global HSBC Group holdings, which gained its entry in the Canadian Market in 1981, through the acquisition of an acceptance company that financed small companies’ equipment and machinery, and transformed into a wholly owned subsidiary of the HSBC Group (Critchley, 2011). HSBC Canada offers the normal banking and financial services, which entails receiving deposits from customers, offering credit and loan services to individuals and businesses, as well as offering insurance and investment opportunities for investors through the securities market. The bank initially started with a single branch in Vancouver, but has grown and expanded over time, mainly through the application of the acquisition strategy, where the HSBC Canada has acquired other financial and allied companies in different parts of Canada and incorporated them into the banking affiliation. The bank has expanded to all the provinces in Canada, with a current network of over 130 branches, operating under the services of 6,306 full-time employees (Kiladze, 2013). The bank remains one of the most promising institutions in the country, ranking as the largest foreign-owned bank operating in the country, while ranking as the seventh largest bank in Canada in terms of assets owned, revenues generated and the profitability standings (Campbell, 2007). Despite the initial challenges faced by the bank during its initial acquisition attempts which had continuously failed to bear any fruits, the bank has currently managed to capitalize on acquiring other financial and banking institutions, as the pivotal strategy for spreading branches throughout the country, while possessing substantial asset bases. Recent history HSBC Canada has emerged as one of the most competitive financial institutions in the Canadian market, often managing to beat the competition of the large banks in the country in areas of profitability, as well as return on equity (Libin, 2000). Despite the fact that the bank has around 130 branches spread countrywide, while the large banks have numerous branches numbering to around 1000 each, HSBC Canada has managed to rank among the top tiers of profitable companies, managing to generate 18.4% higher return on equity than any of the big five banks operating in the Canadian market in the year 2000 (Libin, 2000). In the year 2002, the need for efficiency and economic utilization of resources saw HSBC Canada merge its operations with its USA counterpart, enabling the two banks operating from different countries to share some operational resources, yet remain as distinct units (Campbell, 2007). In 2010, the HSBS Canada was dealt a blow by a sudden turn of events, where the Bank of Montreal , one of the large banks in the Canadian marked, ceased to accept free ATM deposits from the HSBC clients and started charging convenience fee against a previous sharing agreement between the banks, thus reducing its deposit taking function (Greenwood, 2013). Further, HSBC Canada has been involved in actualizing lean operations and functional management, not through the conventional means of closing down some branches or operations, but through applying innovative cost reduction strategies. Such lean operational strategies include selling of the bank’s brokerage securities division previously referred to as the HSBC Securities (Canada) Inc. in 2011, which enabled the company to rid off unnecessary expenditures associated with stock brokerage, while generating 208 million Canadian dollars (Critchley, 2011). Further, the bank decided to terminate its consumer finance business in March 2012, after a determination that the Retail Services business as well as the unsecured personal loans to individuals did not support the core business of the bank, and thus was not in line with the banks growth strategy in the Canadian market (Goble, 2014). Competition The highest competition experienced by the HSBC Canada is in the loans and mortgage market, where the large banks have an upper hand over HSBC Canada, considering the fact that such banks have huge assets bases and there are therefore able to offer huge loans and mortgage facilities to their clients, as compared to HSBC Canada whose total assets are relatively lower low, thus limiting its loan and mortgage advancing capacity (Kiladze, 2013). The lending capacity of HSBC Canada with assets worth 34 Canadian billion dollars is by far lower, compared to the capacity of the large banks such as the Toronto-Dominion Bank and the Royal Bank of Canada, which have assets worth $862.5 and $860.8 Canadian billion dollars respectively (G, 2011). The stiff competition for the commercial loans has seen the HSBC Canada pre-tax profit in its second quarter of the year 2013 reduce by 53%, compared to the same period in 2012 (Kiladze, 2013). Further competition for HSBC Canada emanates from the fact that the entry of mortgage brokers, chartered banks and virtual banks into the mortgage market, through a 1992 legislation that allowed for their involvement in this business (Campbell, 2007). Their entry in the Canadian mortgage market has served to increase competition for the lower loan and mortgage seekers, who do not approach the big banks, thus further reducing the HSBC Canada loan and mortgage client base. In addition to credit and loan facilities competition, the financial institutions and the banks operating in the Canadian market have stepped up their the competition for the client base, making the Canadian financial market one of the most competitive markets in the world. HSBC Canada advantage in the marketplace A major advantage associated with HSBC Canada is the fact that the bank has a good reputation, courtesy of its parent company, the HSBC Group Holdings, which has enjoyed the successful operational functioning globally, thus ranking as the global best run bank (Libin, 2000). The reputation creates a brand name that serves as a bait to attract clients, especially foreigners and international citizens living in Canada, who have enjoyed the services of the HSBC brand elsewhere, thus giving the HSBC Canada a cutting edge over the other local banks in Canada. Secondly, HSBC Canada is a lean bank operating in the Canadian market, with around 130 branches, which makes its operational costs low, compared to the other large banks which operates an average of 1000 branches thus incurring huge operational costs. This is an advantage for the HSBC Canada in the sense that, the value of extensive branch network is diminishing in the modern banking sector, with the introduction of alternative, cheap and convenient banking channels such as the mobile phone banking, banking machines, ATMs and internet banking, thus rendering extensive branch networking an extra operational expense (Libin, 2000). Another advantage enjoyed by HSBC Canada is that it has entered into multiple sharing agreements, which enables its customers to bank in other banks and ATMs at reduced or no charges, thus making this strategy an innovative technique of using other banks infrastructure and facilities to run its core businesses. Further, HSBC Canada enjoys the advantage of innovative strategizing, which has seen the bank reduce its operational costs through disposing its brokerage division, while targeting to limit the extension of Retail Services business, as well as the unsecured personal loans, which do not generate much earnings, and thus hinders the realization of the core business and strategies of the bank to grow in the Canadian market (Goble, 2014). Challenges Lack of appropriate branding, accompanied with name changes serves as one of the major challenges that HSBC Canada. Despite the entry of the bank into the Canadian Market in 1981, the bank was not fully branded under the HSBC logo until the late 1990s, thus had previously been considered a local bank (Campbell, 2007). The later change in branding and names disorients the clientele and breaches the face of a solid bank. In addition, size is another challenge that affects the bank. HSBC Canada operates in a very competitive market, where there are other large banks that are able to compete for the clientele, while placing the bank at a disadvantage when it comes to loan and mortgage advancing, thus recently reducing the bank’s profitability in 2013, compared to the same period in 2012 (Kiladze, 2013). Further, the recent orientation of HSBC Canada towards large clients while eliminating the small business from its clientele list is likely to tarnish the business image of the bank even further, thus causing a slump in the banks competitive performance and profitability. HSBC Canada’s prospects for the future The business of HSBC Canada is majorly pitched on the ability of the bank to consistently offer pleasant and high quality customer services to its clients. Therefore, investing on its employees is a major prospect of the company in the future, to ensure that its employees are abreast with the desirable changes in customer services and the current changes in the financial and banking sectors, to ensure that the employees continue to offer high quality services to the clients, an aspect that has historically acted as the bank’s core strength (Sheppard, 2007). Secondly, investment in technology is a future prospect for HSBC Canada, to ensure that the bank takes advantage of the technological channels that allows it to reach more clientele, considering that it is limited in terms of size and assets that its competitors in the Canadian Market, who are extensively located throughout the country with numerous branches at every region (Sheppard, 2007). Further, sustaining the company brand is another future prospect for HSBC Canada, since it will ensure that the bank continues to enjoy the benefits that come with the good reputation of the HSBC globally, thus remaining attractive to both the domestic and international clients. Finally, a refocus on the client strategy from the retail and small business will serve a prospective move for HSBC Canada, to ensure that the bank attracts clients with huge loan and mortgage demands. This aspect will enable the bank to effectively compete with the large competitors in the Canadian market. References Campbell, C. (2007). The little bank that could--maybe. Macleans, 120(22), 35. Critchley, B. (September 20, 2011). "HSBC sells brokerage arm to National Bank". Financial Post. Goble, D. (January 28, 2014). “HSBC dumps small businesses for international profiles: The banking giant is sending letters to customers giving them 60 days to find a new bank.” CBC News. Greenwood, J. (December 6, 2013). “Canadian banks deliver record $29-billion profit this year-but are the good times coming to an end?” The Financial Post. Kiladze, T. (August 06, 2013). “Loan competition hurts HSBC profits.” The Globe and Mail Inc. Libin, K. (2000). More bank for your buck. Canadian Business, 73(16), 10. Sheppard, C. P. (2007). Back to basics: The current competitive strategy of HSBC Bank Canada. Simon Fraser University. Read More
Cite this document
  • APA
  • MLA
  • CHICAGO
(HSBC Canada Investment Proposal Report Example | Topics and Well Written Essays - 1500 words, n.d.)
HSBC Canada Investment Proposal Report Example | Topics and Well Written Essays - 1500 words. https://studentshare.org/business/1807652-business-information-assingment-investment-proposal
(HSBC Canada Investment Proposal Report Example | Topics and Well Written Essays - 1500 Words)
HSBC Canada Investment Proposal Report Example | Topics and Well Written Essays - 1500 Words. https://studentshare.org/business/1807652-business-information-assingment-investment-proposal.
“HSBC Canada Investment Proposal Report Example | Topics and Well Written Essays - 1500 Words”. https://studentshare.org/business/1807652-business-information-assingment-investment-proposal.
  • Cited: 0 times
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Contact Us