Group 5 : Brexit announcement : cause of many changes for HSBC banks and Prudential Insurance

  1. HSBC banks:

HSBC and Goldman Sachs – two major global banks that had publicly threatened to move some operations out of the UK in the event of a Brexit vote – have this morning declined to reiterate such plans.

The omission could be seized upon by the Leave camp as a sign that the firms – and other corporations – were bluffing about jobs losses in order to support the Remain vote in the run-up to the poll. Stuart Gulliver, HSBC’s chief executive, told Sky News in February that Brexit could see 20 per cent of its 5,000 London investment bankers moved out of London to Paris.

Goldman Sachs also issued several warnings that it would be likely to move some staff out of the City if the UK voted to quit the 28-member bloc. But this morning Douglas Flint, HSBC’s chair, emphasised the bank’s “commitment to British businesses, customers and staff,” adding that it “remains undiminished” despite the vote.

Asked about the February comments from Mr Gulliver, a source at HSBC said there was no clarity on the UK’s future trade relations with Europe. “We don’t know what’s happening,” the source said.

HSBC has warned that it could shift 1,000 investment banking jobs from London to Paris if the UK leaves the EU.

As the bank announced it was keeping its headquarters in London after a 10-month review, Douglas Flint, the chairman, told the BBC that while the “best answer” was to remain in a reformed Europe, the bank had the abilityto “move people between London and Paris”.

Flint chaired a board meeting on Sunday night at which the decision was taken not to relocate to Hong Kong – where the bank was based until 1992 when it moved to London to take over Midland Bank.

He said the decision was “based on what will hopefully be a generational view” as he also revealed for the first time how HSBC might respond to a vote to leave in the referendum that could be held in June. The jobs that could move are outside the high street operations and largely in investment banking.

Stuart Gulliver, HSBC chief executive, later told Sky News: “We have 5,000 people in global banking and markets [HSBC’s investment bank] in London and I could imagine that around 20% of those would move to Paris.”

Flint denied suggestions HSBC had lobbied the government to soften the regulatory regime so that it would remain headquartered in London. The bank, which employs 260,000 around the world, 45,000 of them in the UK, is one of the five biggest companies listed on the London stock exchange and the biggest bank in the country.

As well as changes to the tax regime, rules intended to hold individual bankers to account have been eased since HSBC announced the review of its headquarters last April. In his summer budget, George Osborne scaled back the bank levy which, calculated on the size of balance sheets, hit HSBC hardest. Analysts have calculated HSBC will pay £300m to the exchequer – down from £1bn under the previous system.

 

2. Prudential Insurance:

(ADW) UK Insurance Broker Prudential stated on Wednesday that the group may move some of its funds business from London to Luxembourg following the UK’s Brexit vote to leave the European Union.

A move would mean that the insurer’s investment management arm M&G could contribute in distributing its funds throughout the EU.

M&G’s chief executive Anne Richard told reporters on Wednesday that the company could increase the number of its funds domiciled in Luxembourg and also Dublin, depending on the outcome of Brexit negotiations.

“What we are trying to do is give ourselves options so we are in a position to react and adapt,” Richard told Reuters new agency.

“Dublin and Luxembourg would potentially be options for us if we decide we want to have additional funds domiciled in Europe.”

In the first half of 2016, Prudential performed better than forecast, reporting a 2.4 billion euro profit, due mostly to growth in Asia triggering rising share results.

References :

http://www.independent.co.uk/news/business/news/eu-referendum-result-big-banks-fail-to-repeat-threat-to-move-jobs-out-of-uk-in-event-of-brexit-a7099956.html

https://www.theguardian.com/business/2016/feb/15/uk-better-in-reformed-europe-says-hsbc-chair

http://www.wort.lu/en/business/following-brexit-uk-insurer-prudential-could-move-funds-to-luxembourg-57ac8e3aac730ff4e7f64dba

 

 

Groupe 18 – Strategy of HSBC and Prudential after the Brexit announcement

HSBC has warned that it could shift 1,000 investment banking jobs from London to Paris if the UK leaves the EU.

As the bank announced it was keeping its headquarters in London after a 10-month review, Douglas Flint, the chairman, told the BBC that while the “best answer” was to remain in a reformed Europe, the bank had the ability to “move people between London and Paris”.

Flint chaired a board meeting at which the decision was taken not to relocate to Hong Kong – where the bank was based until 1992 when it moved to London to take over Midland Bank.

Stuart Gulliver, HSBC chief executive, later told Sky News: “We have 5,000 people in global banking and markets [HSBC’s investment bank] in London and I could imagine that around 20% of those would move to Paris.”

Flint denied suggestions HSBC had lobbied the government to soften the regulatory regime so that it would remain headquartered in London. The bank, which employs 260,000 around the world, 45,000 of them in the UK, is one of the five biggest companies listed on the London stock exchange and the biggest bank in the country.

As well as changes to the tax regime, rules intended to hold individual bankers to account have been eased since HSBC announced the review of its headquarters. In his summer budget, George Osborne scaled back the bank levy which, calculated on the size of balance sheets, hit HSBC hardest. Analysts have calculated HSBC will pay £300 million to the exchequer – down from £1 billion under the previous system.

“We had no negotiations with the government,” Flint said. “The government was very well aware of our view, indeed of the view of many other people who commented upon it, but there certainly was no pressure put, or negotiation.”

Even so, analysts said these changes played a part in the decision by the bank’s board to remain in the UK.

Laith Khalaf, an analyst at investment advisers Hargreaves Lansdown, said: “The bank has responded to a big carrot dangled by the chancellor in the form of changes to the bank levy, which will in time make the tax less onerous for HSBC.”

It came down to a choice between the UK or returning to Hong Kong. Andre Spicer, of Cass Business School, said: “The focus on regulation and the current state of the Chinese market has blinded us to other reasons why HSBC chose to stay put – it is likely the collective interests of the UK corporate elite played a role.”

One City analyst did not welcome the decision to stay put. Ian Gordon, banks analyst at the stockbroker Investec, said it was a “missed opportunity” and left HSBC burdened by the UK regulatory regime.

HSBC is one of the first banks to set out how it will respond to the regulatory changes set out by Sir John Vickers’ Independent Commission on Banking to protect taxpayers from another taxpayer bailout by ring fencing its high-street arm from the investment bank.

Vickers, who had warned that the Bank of England had watered down the rules on the capital cushion banks must hold to protect against collapse, said HSBC’s decision to stay supported his view for high capital levels.

“Strong capital buffers for ring fenced banks and HSBC’s decision to stay UK-based go hand in hand. You get the benefits of global banks in London without heightened risk to high street banking,” said Vickers.

A Bank of England spokesperson defended the mix of capital it was demanding banks hold as a cushion. “On a comparable basis, globally systemic banks in the UK will be required to have ten times more capital than before the crisis,” the spokesperson said.

HSBC’s decision was welcomed by the Treasury: “It’s a vote of confidence in the government’s economic plan and a boost to our goal of making the UK a great place to do more business with China and the rest of Asia.”

The employers body, the CBI, said it was a welcome move but that it also “emphasizes the need for the UK to continuously stay competitive on regulation, tax and talent”.

 

Prudential

Britain’s decision to leave the European Union will have a major impact on the global insurance industry, and not just for organizations based in the UK. This note outlines key issues and areas in which insurance companies should be planning ahead, including:

  • Impact on the workforce
  • Impact on pension plans
  • Impact on insurance assets and liabilities

John Nelson, chairman of Lloyd’s of London, points out that EU membership brings three specific benefits to the UK insurance industry:

  • Passporting rights mean funds don’t have to be localized in other EU jurisdictions to meet liabilities.
  • Lloyd’s enjoys bilateral agreements negotiated by the EU with third-party countries.
  • Eighty percent of the capital deployed at Lloyd’s comes from outside the UK and is attracted, in part, by access to the single market.

There are likely to be lengthy negotiations on the UK’s ongoing access to EU markets, potentially resulting in a series of bilateral treaties to enable UK firms to passport into the EU (and affording the same privileges to EU insurers and brokers wanting to operate in the UK).

The approach to the regulation of UK insurers is unlikely to change. The Prudential Regulation Authority (PRA) was heavily involved in the negotiation of the Solvency II Directive, based on the UK’s own “risk-based” system, so we can expect the PRA to continue its commitment to a Solvency II-type system for insurance companies.

Prudential may relocate M&G funds following Brexit vote

The chief executive of M&G, Anne Richards envisages to shifting more funds to Dublin and Luxembourg after the Brexit vote.

EU client are very important for M&G, a tenth of M&G’s £255.4bn assets under management were from them.

Unfortunately, investors afraid by the EU referendum have been removing their money, causing a 10% drop in M&G’s first-half profits. That is why, the firm envisages to expand its Dublin base, where it began building a funds business shortly after the Brexit vote, to maintain access to the EU’s single market.

“What we are trying to do … is give ourselves options so we are in a position to react and adapt,” she said. “Dublin and Luxembourg would potentially be options for us if we decide we want to have additional funds domiciled in Europe.”

Mike Wells, Prudential’s chief executive, said there was no question of leaving the UK behind after the country’s vote to quit the EU. Prudential generates 80% of its sales and 70% of its profits outside Europe.

M&G’s operating profits dropped 10% to £225 millions in the first six months of the year, as investors pulled out nearly £7 billion in the run-up to the EU referendum. The fund outflows are now slowing, after the Brexit vote triggered a spike in withdrawals.

This was offset by strong performances elsewhere.

Prudential’s profits rose:

  • 15% to £743m in Asia,
  • 9% to £642m in the US
  • 8% to £473m in the UK.

And group profits increased 6% to £2.1bn, beating analysts’ forecasts of £1.8bn.

M&G’s optimal income fund, which has many European clients, has seen the biggest withdrawals, and its global dividend fund has also been hit. To offset the outflows, M&G had cut costs by 8%.

In the UK, Prudential has withdrawn from bulk annuities and blamed what it said was the onerous capital impact under the Solvency II rules.

 

https://www.mercer.com/content/dam/mercer/attachments/global/gl-2016-insurance-brexit-the-need-to-plan-ahead-mercer.pdf

https://www.theguardian.com/business/2016/aug/10/prudential-may-relocate-m-and-g-funds-brexit-vote

https://www.theguardian.com/business/2016/feb/15/uk-better-in-reformed-europe-says-hsbc-chair

 

Group16 – HSBC’S and Prudential’s approaches after the announcement of Brexit

According to research from HSBC after Wednesday’s Autumn Statement, Brexit’s hit to the British economy will leave an indelible mark on the country, causing a permanent loss of output, and wiping billions off GDP in the next five years.

HSBC or Hong Kong and Shanghai Banking Corporation a British multinational banking and financial services holding company headquartered in London, United Kingdom. It is the leading global bank, which has assets worth $2.6 trillion (£1.9 trillion).

On the other hand, Prudential Corporation plc is a British multinational life insurance and financial services company which was founded in London in 1848 on the principles of integrity, security and prudence which they still adhere to those values today. Prudential provides protection and savings opportunities for corporate customers, social and economic benefits for communities in which we operate, jobs and opportunities for employees and financial returns for its investors.

So, how did these two major London-originated companies changed their strategies after Brexit had taken place? Let’s take a closer look.

HSBC STRATEGY

At first, HSBC was considering moving its center to Hong Kong when Brexit question was raised. However, HSBC’s board has voted to remain in the UK – a decision that draws a line under almost a year of uncertainty over the future of Europe’s biggest bank. Chairman Douglas Flint said the decision was a « generational » one and is likely to result in the bank remaining in the UK for decades to come.

« As a global, systemically-important bank, in many ways the framework that we’re subject to is independent of location, » Mr Flint said. « I think the UK has got a very developed and internationally-respected regulatory and legal system, it has considerable experience in dealing with complex international matters, because it is the largest and the most international financial centre. Hong Kong is the number three financial centre in the world and it too has the framework in place to handle an institution like HSBC, but we’re already in a framework where that can take place. »

However, there is another option instead of moving the capital far away to Asia. Mr Flint said that, should Britain vote to leave the EU, HSBC might look to relocate some investment banking and other operations to Paris: « If Britain were to vote to leave, it could have a meaningful impact. It would depend on what the negotiation of terms were [for the City of London].

« The likely impact would fall on the wholesale, global banking and markets business. We have the option, given we have a very meaningful bank in France, of adjusting the location of activities and people between the banks. »

HSBC chief executive Stuart Gulliver added that this could amount to roughly 1,000 staff heading over the Channel in the event of Brexit. The timing on that is in around two years’ time when the UK has fully left the EU. HSBC had initially hoped it would not have to move any of their employees. The bank was counting on Britain retaining access to Europe’s single market which allows it to trade and sell all financial products from London. However, such a deal now looks unlikely.

PRUDENTIAL STRATEGY

According to the new head of Prudential’s M&G fund management arm, Anne Richards, has said it is considering shifting more funds to Dublin and Luxembourg after the Brexit vote. Richards, who joined in June from Aberdeen Asset Management, said a tenth of M&G’s £255.4bn assets under management were from EU clients. “It’s a very important client base for us.”

Investors spooked by the EU referendum have been withdrawing their money, causing a 10% drop in M&G’s first-half profits. Richards said the firm was considering expanding its Dublin base, where it began building a funds business shortly after the Brexit vote, to maintain access to the EU’s single market.

“What we are trying to do … is give ourselves options so we are in a position to react and adapt,” she said. “Dublin and Luxembourg would potentially be options for us if we decide we want to have additional funds domiciled in Europe.” This will depend on how the UK’s Brexit negotiations with the EU pan out. Under current rules, investment managers need a base in the EU to sell their funds to continental European retail investors.

Mike Wells, Prudential’s chief executive, who took over from Tidjane Thiam last year, said there was no question of leaving the UK behind after the country’s vote to quit the EU. “We like the market, we are succeeding here,” he said, adding that “at group level the immediate impact will not be material”. Prudential generates 80% of its sales and 70% of its profits outside Europe.

M&G’s operating profits dropped 10% to £225m in the first six months of the year, as investors pulled out nearly £7bn in the run-up to the EU referendum. The fund outflows are now slowing, after the Brexit vote triggered a spike in withdrawals.

This was offset by strong performances elsewhere. Prudential’s profits rose 15% to £743m in Asia, 9% to £642m in the US and 8% to £473m in the UK. Overall, group profits increased 6% to £2.1bn, beating analysts’ forecasts of £1.8bn. M&G’s optimal income fund, which has many European clients, has seen the biggest withdrawals, and its global dividend fund has also been hit. To offset the outflows, M&G had cut costs by 8% “around compensation, marketing and good housekeeping”, Richards said.

In early July, M&G barred redemptions to its £4.4bn property portfolio fund, one of several property funds that suspended trading to stop the rush of withdrawals after the Brexit vote.

Why most of their strategies are mainly about moving operations to abroad?

« CEOs are reacting to the prevailing uncertainty with contingency planning, »said Simon Collins, KPMG UK chairman.

« Over half believe the UK’s ability to do business will be disrupted once we Brexit and therefore, for many CEOs, it is important that they plan different scenarios to hedge against future disruption. »

The June vote has created uncertainty over Britain’s future economic and trade relationship with the European Union. John Nelson, chairman of Lloyd’s of London, told Reuters last week that the insurance market would be ready to move some of its business to the EU as soon as Britain invoked Article 50 of the EU’s Lisbon Treaty, which triggers the start of exit from the bloc.

What can companies do to minimize the Brexit impacts?

Shedding antiquated legacy technologies and embracing the new digital economy can help CFOs sharpen their risk assessment, drive revenue and identify new areas of focus, depending on market conditions. The right tools can be an effective hedge for business performance, regardless of economic circumstances. A good rule of thumb is to implement processes that are well suited for the following capabilities:

  1. Agility: All teams within the finance organization will be impacted by market volatility. In a changing business environment, it’s important to build flexible platforms that support new revenue and expense models, rapid internal reorganization and greater process automation. By leveraging the right tools (cloud computing, for example), agile companies will be able to have the live insights to make smarter, in-the-moment decisions.
  2. Risk management: Most companies recognize the importance of strategically balancing risk and opportunity in order to create significant competitive advantage and profitability. However, global research commissioned by SAP, revealed that only one in ten organizations are fully satisfied with their GRC tools. Employing the right technology provides transparency into internal activities and brings visibility to supplier and credit risk in the broader ecosystem. Furthermore, real-time management of currency and country risk allows for optimization of exposures and hedging.
  3. Continuous monitoring of operations: To keep pace with real-time transaction processing, finance organizations are embedding compliance monitoring directly into their transactional systems, allowing 24×7 monitoring to keep their organizations safe. With core compliance centralized and automated, focus turns to collaborating effectively with the risk-management function, with a shared goal of protecting the brand. By opening lines of communication between departments (that might not otherwise interact) enterprise risk topics become focus while business networks provide visibility into supplier and credit risk.

Sources:

http://insurance-companies worlds.blogspot.fr/2016/03/prudential.html

http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/12156882/HSBC-will-remain-in-London-after-board-makes-final-decision-on-bank-HQ.html

http://uk.businessinsider.com/hsbc-research-brexit-permanent-damage-economy-2016-11?r=US&IR=T

http://www.independent.co.uk/news/uk/home-news/brexit-hsbc-economy-banks-eu-referendum-latest-jobs-single-market-effects-a7104351.html

https://www.theguardian.com/business/2016/aug/10/prudential-may-relocate-m-and-g-funds-brexit-vote

http://www.reuters.com/article/us-britain-eu-companies-idUSKCN11W002

http://www.huffingtonpost.com/thack-brown-/preparing-for-the-next-br_b_11650346.html

Group 6: Prudential & HSBC: Doomed to Change Strategies after Brexit Annoucement

« HSBC is one of the world’s largest banking and financial services organisations serving around 46 million customers. Our aim is to be acknowledged as the world’s leading and most respected international bank. »

« Helping people and businesses worldwide with their insurance and financial needs as a trusted brand and one of the world’s most admired companies. »

 

The UK leaving the European Union led to significant consequences for asset managers and for the financial services.

HSBC chief executive Stuart Gulliver said trading operations that generate about 20 per cent of revenue for the lender’s investment bank in London may move to Paris, quantifying some of the aftershocks for the UK after Brexit. “Activities specifically covered by EU legislation will move, and looking at our own numbers, that’s about 20 per cent of revenue,” Gulliver said in a Bloomberg Television interview at the World Economic Forum in Davos, Switzerland.

More precisely, HSBC is planning to move up to 1,000 staff from the UK to Paris. Douglas Flint, HSBC’s chairman, said on Friday: « The work to establish fresh terms of trade with our European and global partners will be complex and time consuming.

« We will be working tirelessly in the coming weeks and months to help our customers adjust to and prepare for the new environmnent. »François Villeroy de Galhau, governor of the Bank of France, said this week: « It would be a bit paradoxical to leave the EU and apply all EU rules, but that is the solution if Britain wants to keep access to the single mark ».

HSBC has also announced that it will shut down 62 branches across the UK on the same day the Supreme court made its decision on the Brexit vote. The enormous cuts to the branch network could trigger up to 180 job losses, but the bank said it would try and redeploy staff where possible.

Ms McDonagh added: « More customers are using mobile and internet banking than ever before, innovation such as Touch and Voice ID has proved extremely popular, and fewer people are using branches.

She said the bank would offer customers « individual sessions » to help them bank with HSBC outside of the branch. « Our priority now is to work with our colleagues, our customers and the communities impacted by today’s announcement. « We are contacting customers to explain the decision and help them with alternative ways to bank with us.

Not only banks are affected by this decision but the whole Financial sector and most importantly, the insurance sector.

Prudential, the UK’s largest insurer by value, has said it is considering shifting funds from M&G, its assets management business, to Dublin or Luxembourg following UK’s vote to leave the EU.

A tenth of Prudential’s M&G’s £255.4 billion in assets under management are from EU clients. Anne Richard, the chief executive of M&G, said the decision to move assets will depend on the outcome of UK’s negotiations with the EU.

M&G’s operating profits dropped 10% to £225m in the first six months of the year, as investors pulled out nearly £7bn in the run-up to the EU referendum. The fund outflows are now slowing, after the Brexit vote triggered a spike in withdrawals.

« What we are trying to do as a business is give ourselves options so we are in a position to react and adapt to whatever negotiations come through over the next year or so regarding Brexit, » Richard said. « We have, at the moment, business domiciled in both Dublin and Luxemburg so both of those would potentially be options for us if we felt that we should have additional funds domiciled in continental Europe, » she added.

References:

http://www.independent.co.uk/news/business/news/brexit-latest-news-eu-referendum-prudential-mg-insurance-fund-management-assets-a7183021.html

http://www.independent.co.uk/news/business/news/brexit-latest-news-hsbc-bank-move-20-per-cent-fifth-london-banking-operations-paris-chief-executive-a7532711.html

http://www.dailystar.co.uk/news/latest-news/581495/HSBC-brexit-ruling-supreme-court-bank-UK

http://www.cityam.com/249990/taking-stock-first-three-months-brexit-financial-markets

 

Group 19 – HSBC and Prudential Plc: Moving Strategy after the announcement of Brexit

Douglas Lippoldt, Senior Trade Economist, HSBC: How will Brexit affect trade?

There are at least three broad scenarios for future UK-EU trade relations:

  • “soft exit” based on a deep free-trade arrangement for the UK inside of the European Economic Area.
  • “hard exit” which could involve leaving the EU single market and reverting to the basic World Trade Organization regime. This would result in the loss of trade preferences and a reduction in market openness.
  • “a modified hard exit”

HSBC is planning to move up to 1,000 staff from the UK to Paris due to Britain’s narrow vote to leave the EU.

Banks executives have warned that an EU withdrawal would cause companies to cut investment in the U.K. and move jobs elsewhere. While many U.K. businesses are making statements about « uncertainty » and « disruption,” few have given concrete examples of what they would do regarding investment or employees in London.

 The leading global bank, which has assets worth $2.6 trillion (£1.9 trillion), has said it will relocate the jobs if the UK leaves the single market, a possible outcome of post-Brexit negotiations, according to the BBC.

Employees at HSBC in Canary Wharf, who already process payments made in euros, would join the 10,000 currently based in the French capital under the plans.

HSBC currently employs around 48,000 people in the UK, and around 260,000 across the world.

« We will be working tirelessly in the coming weeks and months to help our customers adjust to and prepare for the new environment. »

HSBC forecasted that inflation could increase to 4 per cent within 18 months after the pound sterling’s Brexit-induced collapse.

Prudential may relocate M&G funds following Brexit vote

 M&G is an investment manager in the UK and overseas. It is an autonomous business within the Prudential Group, running its own retail and institutional funds operation and functioning as the asset manager for Prudential in Europe.

Prudential Plc is a British multinational life insurance and financial services company headquartered in London.

 Investors spooked by the EU referendum have been withdrawing their money, causing a 10% drop in M&G’s first-half profits. The new head of Prudential’s M&G fund management arm, Anne Richards said the firm was considering expanding its Dublin base, where it began building a funds business shortly after the Brexit vote, to maintain access to the EU’s single market. Prudential admitted in a statement accompanying its first-half results that its UK-domiciled operations (including its fund management arm M&G) could be negatively impacted by Brexit. Under current rules, asset managers need an EU base in order to sell investment funds to retail investors in continental Europe. It remains unclear how these rules will apply post-Brexit.

“What we are trying to do … is give ourselves options so we are in a position to react and adapt” and “Dublin and Luxembourg would potentially be options for us if we decide we want to have additional funds domiciled in Europe” said Anne Richards.

 

http://www.independent.co.uk/news/uk/home-news/brexit-hsbc-economy-banks-eu-referendum-latest-jobs-single-market-effects-a7104351.html

http://www.gbm.hsbc.com/insights/economics/how-will-brexit-affect-trade

https://www.bloomberg.com/news/articles/2016-02-15/hsbc-ready-to-move-1-000-bankers-to-paris-on-brexit-ceo-says

https://www.theguardian.com/business/2016/aug/10/prudential-may-relocate-m-and-g-funds-brexit-vote

https://en.wikipedia.org/wiki/M%26G_Investments

http://www.insurancebusinessmag.com/uk/news/breaking-news/prudential-may-move-parts-of-business-postbrexit-36378.aspx

https://www.youtube.com/watch?v=vyMt-vtP3JI

 

Group 3- HSBC and Prudential strategy in response to the Brexit annoucement

The United Kingdom’s Brexit vote has major implications for the insurance and financial sectors, considering their investment yields and income are likely to fall due to the pressure on interest rates. Prudential ‘s ( PRU ) stock fell over 7% following the Brexit vote on June 23 amid increased economic uncertainty and fears of falling investment income owing to subdued interest rates and falling yields. However, it has since recovered on expectations of additional stimulus measures by central banks around the world to tide over the Brexit-related decline in trade and money supply.

Prudential, which manages £150bn, says: “We should all plan for a ‘hard’ Brexit scenario.”

Prudential is seeking new market opportunities in Europe:

Insurance giant Prudential plc recently stated that it may transfer more funds from its asset management arm in London to Luxembourg or Dublin. These transfers will be made in order to maintain access to the EU’s single market after Britain chose to leave the union at the end of June.

Like other British insurers, Prudential experienced volatility in its share price due to the uncertainty caused by the EU referendum. Fortunately, strong growth in Asia is helping offset lower profits in Europe.

« At the group level, the immediate impact of Brexit will not be material, » chief executive officer Mike Wells reassured reporters during a conference call. « Asia has been and will continue to be the growth engine of this group. »

On the other hand, Prudential admitted in a statement accompanying its first-half results that its UK-domiciled operations (including its fund management arm M&G) could be negatively impacted by Brexit.

Anne Richards, M&G’s chief executive, told reporters that the company was considering increasing the number of funds domiciled in Luxembourg and Dublin, depending on the outcome of the Brexit negotiations. Under current rules, asset managers need an EU base in order to sell investment funds to retail investors in continental Europe. It remains unclear how these rules will apply post-Brexit.

What we are trying to do is give ourselves options so we are in a position to react and adapt,” Richards stated. “Dublin and Luxembourg would potentially be options for us if we decide we want to have additional funds domiciled in Europe.

Prudential reported a 6% rise in its first-half operating profit to £2.06 billion on August 10, led by growth in the Far East. Operating profits in Asia rose 15% to £743 million, while M&G’s operating profits fell 10% to £225 million. Prudential stated that M&G continued to experience significant net outflows in the first half.

Prudential, the UK’s largest insurer by value, has said it is considering shifting funds from M&G, its assets management business, to Dublin or Luxembourg following UK’s vote to leave the EU.

Anne Richard, the chief executive of M&G, said the decision to move assets will depend on the outcome of UK’s negotiations with the EU.

Richards said the firm was considering expanding its Dublin base, where it began building a funds business shortly after the Brexit vote, to maintain access to the EU’s single market.

Mike Wells, Prudential’s chief executive, who took over from Tidjane Thiam last year, said there was no question of leaving the UK behind after the country’s vote to quit the EU. “We like the market, we are succeeding here,” he said, adding that “at group level the immediate impact will not be material”. Prudential generates 80% of its sales and 70% of its profits outside Europe.

Two of Europe’s biggest banks warned on Wednesday that they could each move about 1,000 jobs out of London as they prepare for expected disruption caused by Britain’s exit from the European Union

HSBC moving staff to Paris:

HSBC Chief Executive Stuart Gulliver said his bank will relocate staff responsible for generating around a fifth of its UK-based trading revenue to Paris.

HSBC, Europe’s biggest bank, is at an advantage to its major U.S. rivals as it already has a large subsidiary in Paris that holds most of the licenses needed by an investment bank, meaning that Gulliver has been able to set out more detailed plans.

The shift of jobs will be a blow to the City of London, which has been lobbying since the Brexit vote for financial firms in Britain to retain the EU ‘pass porting rights’ that allows them to sell their services across the bloc.

HSBC plans Paris move after Brexit

 

HSBC will move staff responsible for generating around a fifth of its UK-based trading revenue to Paris following Britain’s exit from the European Union, Chief Executive Stuart Gulliver said on Wednesday.

« We’re not moving this year and maybe not even next year, » Gulliver said in an interview on the sidelines of the annual meeting of the World Economic Forum in Davos.

« We will move in about two years time when Brexit becomes effective, » Gulliver added.

HSBC, Europe’s biggest bank, has all the licenses it needs for such a move, Gulliver said, and would only need to set up a so-called intermediate holding company in France, a move that should take only a matter of months.

HSBC‘s global banking and markets division that houses those trading jobs made profits of $384 million in the UK in 2015, according to a company filing.

Gulliver has been among the more outspoken global bank chief executives about the impact of the Brexit vote, saying in the immediate aftermath of the referendum last June that the bank could move around 1,000 roles to Paris.

Britain’s financial services sector has said it will accelerate plans to move some business overseas after Prime Minister Theresa May said on Tuesday the country will quit the European Union’s single market.

Banks had initially hoped Britain could retain the access to Europe’s single market that allows them to trade and sell all financial products from London, meaning they would not have to move staff, but such a deal now looks unlikely.

Financial firms instead have shifted to pushing for a transitional period in case it proves difficult to negotiate a favorable deal or if talks are protracted and go beyond the two-year time frame for divorce talks.

HSBC shares were up 1 percent by 0821 GMT, against a 0.8 percent fall in the broader European banks index.

Sources:

  • http://www.independent.co.uk/news/business/news/brexit-latest-news-eu-referendum-prudential-mg-insurance-fund-management-assets-a7183021.html
  • https://www.theguardian.com/money/2016/jul/02/investment-funds-winners-losers-brexit-eu-referendum
  • http://www.reuters.com/article/us-davos-meeting-hsbc-idUSKBN1520SO
  • http://www.cnbc.com/2017/01/18/reuters-america-update-1-hsbc-to-shift-staff-from-britain-to-paris-after-brexit.html

Groupe 4 – How does Brexit Impact HSBC and Prudential ?

The United Kingdom’s Brexit vote has major implications for the insurance and financial sectors, considering their investment yields and income are likely to fall due to the pressure on interest rates. Prudential ‘s ( PRU ) stock fell over 7% following the Brexit vote on June 23 amid increased economic uncertainty and fears of falling investment income owing to subdued interest rates and falling yields. However, it has since recovered on expectations of additional stimulus measures by central banks around the world to tide over the Brexit-related decline in trade and money supply.

Impact Of Lower Interest Rates (Jul 01, 2016)

Prudential is expected to generate about 20% of its revenues from investments in the global markets in 2016, totaling about $11 billion. 

The risk of persistent lower interest rates will definitely impact this metric, considering fixed maturity securities contributed almost 67% of Prudential’s net investment income in the last two years. 

Prudential has considerable exposure to fixed maturity securities in the U.S., U.K as well as the rest of Europe. Post-Brexit, the yield on the 10-year U.S. treasury note fell below 1.5% for the first time since 2012, yields on U.K. benchmark government bonds fell below 1% for the first time on record and 10-year government bond yields in Germany ended below 0%. Other developed economies such as France, Sweden, Switzerland and Japan all touched all-time lows.

The fall in investment yields is likely to have a considerable impact on Prudential’s valuation, considering that investments contribute over 20% of the company’s valuation, per our estimates. We expect Prudential’s yield on U.S. retirement assets to decline to around 0.8% by the end of our forecast period. Owing to persistent low interest rates and falling government bond yields, there could be a downside of about 10% to the company’s valuation if its yield on U.S. retirement assets declines to about 0.7%.
Source : http://www.nasdaq.com/article/how-can-brexit-impact-prudential-cm643996#ixzz4Xu1G2f9n

Prudential may relocate M&G funds following Brexit vote (Aug 10, 2016)

M&G’s operating profits dropped 10% to £225m in the first six months of the year, as investors pulled out nearly £7bn in the run-up to the EU referendum. The fund outflows are now slowing, after the Brexit vote triggered a spike in withdrawals.

The new head of Prudential’s M&G fund management arm, Anne Richards, has said it is considering shifting more funds to Dublin and Luxembourg after the Brexit vote.

Richards, who joined in June from Aberdeen Asset Management, said a tenth of M&G’s £255.4bn assets under management were from EU clients. “It’s a very important client base for us.”

“What we are trying to do … is give ourselves options so we are in a position to react and adapt,” she said. “Dublin and Luxembourg would potentially be options for us if we decide we want to have additional funds domiciled in Europe.”

Source : https://www.theguardian.com/business/2016/aug/10/prudential-may-relocate-m-and-g-funds-brexit-vote

Brexit: HSBC may move 20% of its London banking operations to Paris, chief executive Stuart Gulliver says (Jan 18, 2017)

Activities specifically covered by EU legislation will move, and looking at our own numbers, that’s about 20 per cent of revenue,” Gulliver said in a Bloomberg Television interview at the World Economic Forum in Davos, Switzerland, with John Micklethwait. The bank confirmed that he was referring to the lender’s global banking and markets operations in the UK capital.

Gulliver, who runs one of the world’s most globalised banks, praised Prime Minister Theresa May’s handling of Brexit so far and also said he doesn’t expect a trade war to erupt between the US and China under incoming US President Donald Trump. Such an outcome could damage HSBC, given it makes most of its earnings in Asia. On Tuesday in Davos, Chinese President Xi Jinping urged business and political elites to reject protectionism in his first public rebuttal of Trump’s rhetoric on trade. A trade war “would clearly be negative for us,” Gulliver said. “We are the biggest trade-finance bank in the world.”

Source : http://www.independent.co.uk/news/business/news/brexit-latest-news-hsbc-bank-move-20-per-cent-fifth-london-banking-operations-paris-chief-executive-a7532711.html

HSBC Is Officially Moving Some U.K. Staff to Paris After Brexit (Jan 18, 2017)

Source : https://www.youtube.com/watch?v=uguaJzpAJxM

HSBC ‘s global banking and markets division that houses those trading jobs made profits of $384 million in the U.K. in 2015, according to a company filing.

Gulliver has been among the more outspoken global bank chief executives about the impact of the Brexit vote, saying in the immediate aftermath of the referendum last June that the bank could move around 1,000 roles to Paris.

Britain’s financial services sector has said it will accelerate plans to move some business overseas after Prime Minister Theresa May said on Tuesday the country will quit the European Union’s single market.

Banks had initially hoped Britain could retain the access to Europe’s single market that allows them to trade and sell all financial products from London, meaning they would not have to move staff, but such a deal now looks unlikely.

Financial firms instead have shifted to pushing for a transitional period in case it proves difficult to negotiate a favorable deal or if talks are protracted and go beyond the two-year time frame for divorce talks.

HSBC shares were up 1% by 08:21 GMT, against a 0.8% fall in the broader European banks index.

Source : http://fortune.com/2017/01/18/hsbc-brexit-london-paris-uk/