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HSBC Holdings PLC’s US exit welcomed by analysts

In a note, analysts at Citi said the banking giant’s decision to quit US retail banking could help turn its American wealth and personal banking business “from loss making to being profitable”

News that banking giant Holdings PLC () is finally throwing in the towel and exiting the US retail banking market after 40 years of struggle has been welcomed by City analysts, many of whom have the view that the shift could help push some of the bank’s business into profitability.

In a note on Thursday, analysts at Citi said they believed the exit from retail could help turn HSBC’s US wealth and personal banking (WPB) business “from loss making to being profitable”, mostly by getting rid of the costs associated with its current network of 148 US bank branches.

READ: HSBC to exit US retail banking market amid strategy pivot

The broker, which rates HSBC at ‘neutral’ with a price target of 455p, also forecast that the exit would be completed by the first quarter of next year, while the bank itself had predicted the shift will incur a one-off cost of around US$0.1bn.

Meanwhile, analysts at Shore Capital, which rate HSBC at ‘hold’ with a fair value of 480p, said the exit was “consistent with HSBC’s plan to simplify the business, exit underperforming operations and reinvest in higher return businesses”.

“We would therefore expect the financial impact to be accretive to the group’s return on tangible equity in due course”, Shore Capital said, although they added that they did not think the impact would be “material enough to warrant any change to our group forecasts”.

HSBC’s exit from US retail banking is unlikely to have come as a surprise to the market, with the bank having previously reported that it was considering an exit from the segment back in November 2020.

The move follows a wider restructuring of the bank as it looks to switch its main source of income from interest rates to fee-based businesses and accelerate cost-cutting and downsizing efforts.

Shares in HSBC were down 0.4% at 445.1p in lunchtime trading.

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