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HSBC holdings PLC: building a global wholesale banking capability

Author: Walter, Ingo ; O'Connor, Anthony ; Milstein, SeymourINSEAD Area: FinancePublisher: Fontainebleau : INSEAD, 2007.Language: EnglishDescription: 23 p.Type of document: INSEAD CaseNote: Latest version available via https://publishing.insead.eduAbstract: This case deals with efforts by HSBC, one of the two largest banks in the world by market capitalization, to develop a wholesale banking franchise that can effectively challenge those of major universal bank competitors such as Citigroup, as well as dominant ‘monoline’ firms such as Goldman Sachs and Morgan Stanley. It highlights the key dimensions of wholesale financial intermediation: loan syndication and project finance, loan securitization and credit default swaps, equity capital markets, debt capital markets, secondary market trading and other investment banking services for clients, as well as principal trading and positioning. Like most players in this market, HSBC had some notablesuccesses and failures but did not succeed in breaking into the top ranks of global investment banks despite clearly having the resources to do so. By understanding what it takes to succeed, students should learn a great deal about the competitive dynamics of this industry.Pedagogical Objectives: We start with an overview of global wholesale banking, namely loan syndication and project finance, loan securitization and credit default swaps, and the entire range of investment banking services’ intermediary services as well as principal trading and positioning. Four key questions focus the discussion. 1. Given its powerful global commercial banking franchise, why does HSBC want to become a major force in global wholesale and investment banking business as well? 2. What are the main risks to HSBC shareholders in creating a global investment banking business? 3. Why has HSBC failed in its initiative so far despite a global banking platform that is second to none? 4. With respect to its investment banking ambitions, what do you suggest HSBC should do next?
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Latest version available via <a href=https://publishing.insead.edu>https://publishing.insead.edu</a>

We start with an overview of global wholesale banking, namely loan syndication and project finance, loan securitization and credit default swaps, and the entire range of investment banking services’ intermediary services as well as principal trading and positioning. Four key questions focus the discussion. 1. Given its powerful global commercial banking franchise, why does HSBC want to become a major force in global wholesale and investment banking business as well? 2. What are the main risks to HSBC shareholders in creating a global investment banking business? 3. Why has HSBC failed in its initiative so far despite a global banking platform that is second to none? 4. With respect to its investment banking ambitions, what do you suggest HSBC should do next?

This case deals with efforts by HSBC, one of the two largest banks in the world by market capitalization, to develop a wholesale banking franchise that can effectively challenge those of major universal bank competitors such as Citigroup, as well as dominant ‘monoline’ firms such as Goldman Sachs and Morgan Stanley. It highlights the key dimensions of wholesale financial intermediation: loan syndication and project finance, loan securitization and credit default swaps, equity capital markets, debt capital markets, secondary market trading and other investment banking services for clients, as well as principal trading and positioning. Like most players in this market, HSBC had some notablesuccesses and failures but did not succeed in breaking into the top ranks of global investment banks despite clearly having the resources to do so. By understanding what it takes to succeed, students should learn a great deal about the competitive dynamics of this industry.

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