HSBC Georgia is restructuring
Tuesday, June 23
Q: You have now one year’s experience of working here in Georgia. What are your impressions, evaluations, assessments, your optimism if you have any?
A: I think the world has changed substantially over the last 12 months, and probably nearer 18 months. When I arrived in Georgia last year, there were still a few minor conflicts in Abkhazia and South Ossetia but nobody for a minute thought that the Russians would be invading the country. I don’t even think that back in June or July last year many people would have predicted that just six months later there would be a global financial crisis, the impact of which is also felt here in Georgia. In addition to these two events we have then had to address these political protests on Rustaveli Avenue, which are certainly not conducive to business. Due to all these factors put together business has been subdued, and this affects the rest of the world almost as much as it does Georgia.
Q: Can you specify what your expectations were, and what actually happened, as a result of all these factors? Did your business decrease?
A: 18 months ago the world was a very different place, as I have already mentioned. We had originally planned to make a more aggressive investment, which depended on certain growth targets being met. But for the reasons I have outlined these targets have not been met, and therefore we’ve chosen to keep our investments relative to the growth that we need to have for our business.
Q: Have the rallies in front of your windows influenced your performance or have the Russian invasion and the crisis generally had more effect?
A: I think it is very difficult to say whether the protest has had a specific impact, I think you have to look at the whole picture. We are an international bank, we trade internationally, we have clients internationally, and the global financial crisis and associated withdrawal of credit have impacted on everybody. That’s one of the main reasons why Georgia, along with the rest of the region and the rest of the world, has suffered. So I don’t think we can specifically say that an impact is because of the protests. Although on a day-to-day basis somebody might have decided not to walk in, I don’t think you can specifically say that the protests themselves have harmed our business.
Q: There is a feeling here that it is safer for people to bring their savings to you since this is a world recognised bank, but is this the case?
A: I think we are a very safe bank and we have the backing of probably one of the world’s strongest banking groups. We have very conservative lending policies and because we’ve only been open for a short time we’ve been very selective in the clients we’ve been taking. So the answer is yes, I think we are one of the safest, if not the safest, banks in Georgia for the customers to come and put their money in.
Q: Have you experienced a problem with bad loans so far?
A: I am happy to say, not really. We have been very conservative. Our customers are keeping their obligations and we are keeping ours.
Q: Recently you opened a branch in the Saburtalo district. This had been planned long ago, so it was included in your expansion policy. Do you plan to expand further?
A: As part of the restructuring we are announcing today, we will be withdrawing from the personal financial market. We will no longer be providing any further personal accounts to individuals in Georgia and are realigning our business to become solely a commercial bank, which is where we feel we can make the best return on our investment here, and we feel we can add the best value to the Georgian economy and our Georgian customers.
As we are a commercial bank which funds international trade and helps our clients work internationally we don’t need to invest in a branch network. We have a very powerful and effective internet banking proposition for our corporate customers, called hsbcnet, which allows them to link their accounts with HSBC worldwide, and so for that reason we have no need to physically expand our branch network.
Q: So this means you will not be opening any more branches around the country? Last time I spoke to Mr. Turner I remember him telling me that he was interested in opening a branch in Poti or Batumi....
A: Over the last few months we’ve undertaken a strategic review of our operations in Georgia, and that has led us to conclude that we want to restructure out business with a focus on commercial banking, where we feel our expertise can best serve our customers, so on that basis at the moment we really have no need for any physical branch network.
Q: What is the reason for this restructuring?
A: The main reason is that we looked at our personal business and felt that we have a very low market share anyway, and when we looked at the investment which would be required to make it a large, viable business we came to the conclusion that the resources we have in Georgia at the minute would be much better used growing our commercial banking business. This has been very successful, we’ve grown very dramatically, we have an excellent list of top Georgian clients and it’s growing fast. Many of these clients have an international dimension, through import/export and subsidiaries overseas, and that is where we add value far beyond our Georgian capacity.
Q: So this is the field where you feel yourself more confident because you have international recognition?
A: Globally we believe we are the best bank for international business and we are present in 86 countries. If, let’s say, there is a company importing car parts from Turkey, we can join up the whole of that trade transaction, as the chances are the customer will be a client of HSBC in Turkey, in which case we know both customers who are trading, which makes it easier for us to offer preferential trade and financial terms, so we can help the transaction. More importantly we have local knowledge in each of these countries, so if a Georgian corporate starts trading with a Chinese company in Shanghai, with one phone call to my colleague in Shanghai I can easily start a dialogue between the two customers. I don’t believe there’s any other Georgian bank that can come close to offering their clients that service.
Q: So your future plans lie in this direction?
A: Yes, we are positioning ourselves as the international business bank in Georgia. It’s not a concept which I understand is known in Georgia, a bank which just deals with business customers, but it’s a way of doing business we’ve entered into in 2 other countries, Spain and Italy, and where we have true global leadership.
Q: Last time I interviewed Mr. Turner he said the bank was planning to be actively involved in charitable activities, some social projects. Could you name any which you have already undertaken or are planning?
A: In our year here we have been concentrated on an artistic, educational strand to our support for the English Speaking Union. We sponsored the public speaking competition here and there are various other charities we’ve looked at. We evaluate where we are spending our sustainability money and see what is most appropriate in Georgia.
Q: How many Georgian employees do you have and how many international ones?
A: Well it’s slightly changed, because unfortunately last night due to the restructuring I had to make 16 employees redundant. So our total staff number is 68, and we have 3 expatriates.
Q: Could you give your prognosis as a banker - is Georgia resisting the crisis successfully or is it in a dire situation?
A: I have no special connections but I see the figures and listen to our clients and what we are seeing, I think, is that Georgia is in some ways well placed, because you’ve got a lot of support money coming from the United States and the European Union. The banking system is being helped by EBRD, and I think that along with the rest of the global economy, there are signs around Tbilisi that economic life is improving. We are seeing more inquires over the last 3 -4 weeks. It’s very short term, I’d never say that the recovery’s here, but we are seeing small green shoots of economic life. Our customers are now more interested in borrowing, so I think we have reasons to be quietly optimistic, but I would not go beyond that until we see some more substantive figures of GDP growth.
Q: And how long will the crisis last, do you think?
A: It’s very difficult to say, it depends on many different factors. I don’t think you’ll see the economic exuberance that we’ve seen in the past, which certainly was too much, I think you’ll see a measured return to growth, and it needs to be measured, we can’t suddenly return to the boom days, but we’ll have to wait and see.
Q: Is there anything you would like convey to our readers?
A: I think the most important thing I want to say, just to avoid any doubts, is that although we’ve had to make 16 employees redundant and are reallocating our resources to move away from personal customers, our remit in Georgia is in no way reduced, our financial capital is exactly the same, we are simply reallocating our resources to another area of banking that will help the Georgian economy and our customers. This should not be interpreted as if HSBC is turning its back on Georgia. We are not. We are here for the long term, we have simply had to take a strategic decision to focus on business customers, as we had a very small market share of personal customers.
Q: Why did you come to Georgia? What was attractive about Georgia at the beginning, when it’s a small country with a very small economy?
A: HSBC started in Hong Kong, we did not start in the UK, and emerging markets are our forte, it’s where we believe we can add the most. If you look at our history, we have achieved great success in small emerging markets, you can look throughout Asia for example. Returning specifically to Georgia, I think we identified a great potential in the Georgian people and the Georgian economy and we felt, and still feel, that the country has a great future and we would like to be a part of that future and work with our customers to develop the economy.