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HSBC REGAINING
MARKET VALUE

THE

BRANDS

Contents
Introduction......................................................................................................................................2
LO1

Critical Evaluation of International Financial Markets........................................................2

International Bond Markets.........................................................................................................3

Euro Bond.................................................................................................................................3
Foreign Bond............................................................................................................................4
Interest Bond............................................................................................................................4
International Equity Markets.......................................................................................................5
Eurocurrency Equity Markets..................................................................................................5
Foreign Exchange Markets.......................................................................................................5
LO2

Critical evaluation and application of International Financial Instruments.........................6

Financial Assets............................................................................................................................6
Cash..........................................................................................................................................6
Cash Receipt Contracts............................................................................................................7
Equity and Other Cashable Entities..........................................................................................7
Derivative Entities....................................................................................................................7
Financial Liabilities......................................................................................................................8
LO3

Critical evaluation and application of International Financial strategies.............................9

Reasons HSBC will exit EU member states................................................................................9

Target markets HSCB is considering.........................................................................................10
Conclusion.....................................................................................................................................11
References......................................................................................................................................12

Introduction
The Global Economy has been experiencing serious changes over the past decade and whiles
some companies and nations have been registering huge success others have been facing serious
complications. This has made it important for all stakeholders to carefully evaluate the entire
situation and identify important aspects that can help making their operations smoother. On this
research paper, we shall be evaluating important points linked to HSBC and discuss points the
organization may be experiencing with the recent decision for Britain to exit the European
Union. This decision of Britain leaving the EU has been identified to have major benefits for
Britain as a nation and many of the companies within the country but some like HSBC are
expected to experience complications. With the recent referendum results where Britain opted to
leave the EU, HSBC has registered a 45% decline in profits in the same quarter as compared to
last year. This has triggered the financial company to consider adopting some radical measures to
safeguard the organization's stability, performance, and growth. The UE has been the main focus
for HSBC since its establishment and its head office is in the UK Kynaston & Roberts (2015).
The decision to leave the EU means that HSBC can expect to experience serious complication
while dealing with other EU members. This leaves a bleak future for the brand thus HSBC has
turned its attention from investing and expanding operations in Europe to other regions such as
Asia which offer better opportunities in the future. The research paper sell discusses and
evaluates different decisions linked to BREXIT on HSBC and how the brand to turn the
downturn to a benefit in the future as competitors such as the Deutsche Bank of Germany.
Deutsche Bank has been attempting to expand its operations across the EU for many years but
with the void left by HSBC, expansions in the regions should be considerably easier.LO1
Critical Evaluation of International Financial Markets

HSBC Capital Structure

A companys Capital structure refers tio the fixed assets and capital used to esctablish the
organisation and invest on its infrastructure. Companies like HSBC have to have a vaste amoung
os cpital both fixed and in fuinancial liquidity so as to win the consumers and clients trust. This

is especially important while investing in union territories like the European Union since there
are many competitors in the industry waiting for the opportunity to tap in to the market.
Fixed Assets and Capital
As of the 2015 Annual Report HSBC has an total of 20.4 billion dollars accumulated as fixed
assets and liquid capital as opposed to 18.9 billion in the previous year. The companys capital
and dividends accounted for 10 billion in the year 2015 which was a 7.2% rise from the previous
financial year. As of the 2015 financial report the growth target was 10% but this has been
disrupted due to BRAXIT and HSBC is expected to see a rapid decline in growth in 2016. This
has pushed HSBC to consider alternative markets to expand their operations such as Asian which
also offers a huge client basket but expanding to these markets also means that HSBC will need
to invest a considerable portion of its finances in infrastructure in the region (HSCB 2016).
Equity and Bond trading
International Financial Markets play a huge role towards every economys development making
it important for the international financial mechanism to be properly understood by the investor,
business, and countries Auernheimer (2010). There are different factors which influence the
international financial market having its own effect and preference among the consumers. With
each consumer and client group preferring a different mode of transaction, its important for the
banking systems to offer a wide range of financial transaction modes which will allows all the
clients gain satisfactory results from the banker. HSBC must consider offering all services to its
client as this will help HSBC tap in to huge client markets.
International Bond Markets
International Bond markets refer to the ability of stakeholders to come together with a common
interest so as to influence or have the ability to dictate terms. This is a complex topic since they
take into consideration many factors which must be observed so as to register success. There are
three main types of bonds namely the Euro Bond, Foreign Bond and Interest bond which falls
under the international bond markets Gowland (2013). The Euro bond had developed to
become among the strongest bonds globally thus allowing banks like HSBC to prosper at the
peak of the Europeans unions unity. Today the friction being experienced within the EU is
resulting in HSBC losing considerable amounts of business in the region. This is in turn
triggering HSBC to adopt some radical measures to remain afloat.

Euro Bond
The Euro Bond is a universal bond which was created by the EU member states so as to develop
the monopoly on the international financial market. Its a combination of different stakeholders
who share the same interest and make investments together. This is a brilliant idea since it allows
the members to develop a larger portfolio while approaching the investor thus helping cut down
on all costs associated with the investment Bertocchi & Consigli (2014). This automatically
happens since there are multiple stakeholders uniting to make a single offer, which leaves the
client with few options to turn to. It results in helping the EU securing deals for investment and
loans at low-interest rates and costs thus benefiting all members states.
While this may sound like a brilliant idea, it also requires for all member states to properly
manage their funds so as uphold their part of the deal. Sadly this hasnt been working very well
in the EU where some member states have been misusing their finances resulting in failing to
meet their payment obligations Wood (2007). This has resulted in other members needing to step
in and bail the nations out on several occasions which have developed a serious drift among
member states. With this problem looming at a distance the UK has opted to leave EU
membership which has also resulted in it losing its business ties with EU member states. While
this will deliver huge benefits to the UK as a nation, certain businesses from within the UK such
as HSBC are expected to experience huge losses. This is due to HSBC having invested across the
EU and the breakaway will mean that HSBC is likely to lose it clients in most EU member states.
Foreign Bond
The foreign bond refers to a nation or economy turning to a foreign nation in search of financial
assistance. In most situations, nations will approach international financial organizations like
World Bank and IMF which have predetermined terms and conditions which the nations must
comply to. This places the leverage on the international financial organization since its a
combination of multiple member states which dictate the terms and conditions at which a nation
shall be issued with funding or financial assistance Fabozzi, Martellini & Priaulet (2008). While
there has been limited options for smaller economies to consider, in 2014, Five developing
nations namely India, China, Russia, Brazil and South Africa combined forced to start up a new
international funding bank called BRICS. This was a major development on the international
Financial Markets since it would deliver alternative options to underdeveloped and developed

countries seeking financial assistance Stuenkel (2015). In turn, this would allow these 5 member
states access these economies and begin investing as well as trading in raw materials as well as
manufactured goods.
Interest Bond
Interest bonds is similar to a bank fixed deposited accounts in a bank nation, company, business
is individual may consider investing their savings in an interesting bond and yield x amount of
interest on maturity. Unlike fixed deposits at the banks, an interesting bond is a declaration and
agreement between the lender and borrower to take an amount of money over a fixed period of
time. This locks the lender or investor to leaving the invested funds with the borrower for a fixed
period of time without the ability to cash the bonds. On many situations, the interest bonds
periods will be above 5 years and may even stretch for 20 years or more. In general, the longer
the interest bond stretches the higher rate of interest the lender will gain on maturity Adams
(2007). The interest bond is not limited to the individual or business and many economies with
surplus money are also investing their surplus money on international interest bonds with
organizations like the IMF and the World Bank.
International Equity Markets
The international Equity Market is another major contributor towards the international financial
markets as it helps investors trade in international stocks and generate income. Once again
HSBC is a major stakeholder in the International Equity trading markets since they are
distributed across the EU making is easier for equity investors to transact in different EU equity
markets using a single financial mediator Lang & Maffett (2011).
Eurocurrency Equity Markets
HSBC is well established across the EU, allowing EU equity traders to set up an account with a
single bank located across all the Nations. This results in reducing transaction costs as well as the
logistics it would otherwise be associated to having separated independent markets. With the
well-developed network, HSBC risks now losing a huge number of its EU customers after
Britain Exits the EU. Now the remaining EU member states will need to identify alternative
banks which offer the same networking among the EU states to stand in and cater to the currency
exchange, transfer and management with relation to Equity market traders Agarwal (2013). With

many EU traders investing in different EU equity markets, the ability to connect and make
smooth transactions is critical towards the investors success.
Foreign Exchange Markets
HSBC having established itself across the UE is also likely to loose on the foreign exchange
market which is also a huge income generator of the bank. Its important to keep in mind
millions of investors visit Europe and the EU to trade and they too need some way of making and
reviewing payments. Britains exit from the EU will also result in HSBC losing this source of
income to other banks which offer the connectivity and networking requirements the business
professionals seek.
Each of the above factors has its influence on regional banking organizations like HSBC which
rely on unified and common laws to assist making operations easier. With Britain opting to leave
the EU membership (BREXIT) this is expected to unbalance the trade relations between the EU
member states and Britain-based companies which are likely to result in severely hampering
their operations Weithers (2011). While this may not be the case for businesses which
manufacture or conduct business from within Britain, British companies which have their head
office in Britain and have spread their operations across the European Union are likely to
experience major fallout.

LO2

Critical evaluation and application of International Financial Instruments

International financial Instruments include financial Assets and financial liabilities. International
Financial Instruments Refers to any contract which gives rise to acquiring an Asset or
dispensing/ Sale of a Liability. It is critical that the stakeholders either invest on an Asset which
equivalent cash value or sell liability to generate cash flow. This placed financial organization
likes Banks right in the middle of the financial management process since they deliver the
desired cash liquidity needed to invest in the asset Parameswaran (2011). Its also important to
keep in mind and understand that an item or service which may be observed by one individual as
a liability is viewed by another as an asset. This makes banking institutions like HSBC critical
elements towards driving e-commerce and a requirement for all these organizations to perform
business across borders.

Financial Assets
Financial Assets refer to items which individuals can convert into cash immediately for use on
other products or services. A Financial asset also refers to an investment or purchase which
appreciates in Value over time this increasing the profits yields delivered by the asset Rapp
(2014). Financial assets include liquid cash, contracts allowing one to receive cash, equity
instruments and other cashable entities and derivative entities.
Cash
Cash remains the primary and most liquid financial asset which is accepted by every person or
organization in exchange of goods or services. This makes cash the best asset and most accepted
globally. For many organizations and individuals who may have extra cash, they turn to saving it
at banks which allow them to access the funds any time at a later stage. HSBC has developed an
extensive network of banks across the European Union which delivers a uniform banking system
for its customers across the region. Cash remains as the main form of exchange in business and
being able to access ones funds immediately across the globe is critical. This is especially
important today where business professionals and travellers are moving across the globe and
prefer utilizing their ATMs and Debit cards to make payments while travelling. Unlike the past
when business and leisure travel was mainly financed via cash or travel checks, today people
prefer using plastic money and virtual visa banking to make payments. This is considerably
easier and safer for people to use as compared to cash and this also allows for the client to ask his
family or partners based in their home city to deposit additional funds to the account if required.
Either way cash continues to be an important financial assert since many small consumers
havent adopted digital money transfer modes forcing them to remain dependant on cash as their
primary mode of payment. Having a global distribution helps clients access their cash easier and
at lower transaction rates as compared to using other bank ATM services.
Cash Receipt Contracts
A cash receipt contract is a contract entered into by two stakeholders where the buyer promises
to pay the seller an x amount of money. The best form is cash receipt contracts are checks which
a bank account holder can issue as payment for products or services. In addition to checks, there
are other Cash receipt contracts such as demand drafts, bankers checks, and bonds which can be
issued to an individual with the promise to receive cash on their presentation at the bank.

Equity and Other Cashable Entities

Equities, bonds, and for are also capable entities which fall under financial assets and they can be
used as payment to exchange similarly to cash. While dealing with cashable entities, the terms
and conditions linked to the trading deal may very since the value of these cashable entities also
fluctuates. This gives the seller additional bargaining powers to change or modify the terms to
their benefits. In situations where Regional Corporation is experienced such as the European
Union, the terms may be similar across many nations since their equities are valid and can be
used and therefore classified as an asset which can be used for exchange. HSBC can be
considered an important mediator to delivering suitable terms and conditions to its clients and
helping them making proper and safe transitions linked to receiving equity as cacheable entities
or payment.
Derivative Entities
A Derivative Entity can be termed of a forward exchange contract entered into by two or more
stakeholders where one may invest their liquid cash with the promise of getting repaid with or
without interest at a future date. These can also be known as investment policies where an
investor may opt to provide his liquid cash to large organizations and banks like HSBC over a
long term period Sangiuolo & Seidman (2008). The receiver than enters into a forwards
exchange contract where they state when, how and how much they would be paying back the
investor over an agreed period of time. The receiver of the bank then needs to make
arrangements to properly manage and invest the received cash so as to generate profits and
repay the adhere to the forwarded contract. Derivative Entities are also contracts which may be
entered into after disputes where the losing party is instructed to compensate the other x amount
of money but has no finances to pay the amount. In such a situation they need to enter into a
forward exchange contract which they promise to pay x amount of money during a fixed period.
Breaching the forward exchange contract is then recognized and an intentional financial crime
and fraud and can attract imprisonment since the individuals has entered into a formal contract.
Financial Liabilities
This refers to a contract obligation and agreement to deliver cash or a financial asset with regard
to a certain investment or debt. In simple words, it means payments which need to be made
towards an organization or individual. In some situations, these are not receivable which results

in lenders such as banks intervening to auction the secured assets so as to recover the cash
investment. Liabilities also come in the form of products and good and these can usually be
classified as investments which constantly depreciate and lose value as opposed to increasing
value Bhattacharyya (2016). Clothing, automobiles, and several other items are classified as
initially being investments as they are used for work. Over time they become liabilities as their
base value decreases over time making them harder to cash and in many stations will be sold at
scrap value after some years.
HSBC being a financial organization finds itself at the forefront of dealing with all the above
needs since the organization must manage finances and relies on the finances to remains in
business. With BREXIT HSBC has suddenly found itself losing out on EU business which has
already dealt a heavy blow on the organizations. With the BREXIT referendum decision HSBC
has had to reconsider and replant their business objectives since EU countries no longer offer
attractive policies and agreements. With Britain exiting the EU membership, British companies
are likely to experience serious complications renegotiating with EU countries to allow the bank
to maintain its operations in the European Union.

LO3

Critical evaluation and application of International Financial strategies

BREXIT has triggered serious trade issued for certain businesses like HSBC which has also
resulted in the bank registering a 45% loss immediately after the results were announced. With
little to no chance of HSBC retaining its operations in the EU over the long term perspective, the
bank has begun liquidating its assets in the EU nations. This is due to the bank needing to
consider expanding its operations to other regions so as to remain in operation. Its a major blow
for HSBC operations which were thriving across the EU as the bank was considered as the best
service provider by most EU members Brooke (2016). The bank offered universal banking
regulations for its customers in the UE but with Britains exit of the UE, the terms and conditions
are likely to change where the EU member states will discourage promoting the British
companies due to being a Non-European Union member.
Reasons HSBC will exit EU member states.
HSBC is the largest banking partner for most people and companies in the EU but with Britains
unanimous vote to leave the EU, it is unlikely the EU members will retain and promote a British

company. There are several reasons linked to that one being the terms and conditions HSBC is
utilizing to operate in the EU would be classified as null and void after Britain exits the EU. With
the vote already having been passed, Britain has no option to regain its position and will have to
leave EU membership and reapply for the EU if they want to a re-join the European Union.
Once Britain has exited the EU all agreements with British companies invested in EU nations is
also likely to be re-evaluated and new terms and conditions discussed. This makes is extremely
difficult for HSBC to secure attractive terms for the bank to remain in the country but besides
HSBC legal aspects, there is also patriotism Oxelheim & Ghauri (2014). With Britain voting to
leave the EU, other EU members, and the public is likely to boycott British companies and
brands working in the countries. This can result in serious financial complications since the
public in the EU nations may observe British brands and companies as traitors and avoid them
altogether. This makes the trading in the UE nations difficult for British companies due to
consumers in EU nations viewing the British as non-co-operative and unwilling to retain unity in
European affairs.
Target markets HSCB is considering
With prospects linked to retaining its control and smooth operations in the European banking
industry, HSBC has turned its attention to focusing on new markets. The past two decades Asian
economies have been registering tremendous development and growth and many offer huge
opportunities for international brands. The public banking sector has been identified to deliver
serious complications to users who are turning to private international banks. But which many
private banks are available in the Asian economies, international banks which an extensive
network across Asia and other parts of the world are limited Sussangkarn, Park & Kang (2011).
Bankers in Asian economies have also been identified to have a high demand for international
brands thus an international bank which offers high-quality services at affordable rates is likely
to register huge success.
There is also the element linked to globalization and international trade were many investors in
the region are searching for trading partners to make investments across the globe. This is
especially important while considering equity and FOREX trading which has been registering a
huge increase in Asia over the past decade. While many equity traders have already invested in
the national equity markets, many still want to open equity trading accounts in foreign markets

which allow them to trade for longer periods thus generating more income. To do this the
individual will require visiting the nations and completing all the formalities which make it
complicating for many investors McGowan, Cornelissen & Nel (2007). By having a mediator
banker in Asia that is capable of setting up the accounts, it is likely to see a considerably larger
number or investors tuning to HSBC to perform this transaction. Rather than focus on delivering
on traditional banking opportunities to the investors in Asia, HSBC can specialize in interlinking
the investor to foreign markets which will help them tap into a unique set of clients. With the
number or equity investors on the rise across Asia and technology making it possible for even
more investors to consider the field, HSBC is likely to tap into a huge client basket in the region
and help compensate its losses in the European Union.
Asia has been identified to have a low currency value but the region has been noted to develop
huge business across the globe simply due to the companies in the region offering low cost
services and products. This is especially observed in the IT and technology sectors which have
attracted IT outsourcing by companies across the globe to countries like India. China on the other
hand has been identified to manufacture highly competitive consumer products and electronics
such as low cost Mobile and smart phones. This has resulted in the two Asian economic tapping
in to a huge consumer market across the globe that are unable to afford purchasing high end
branded electronics or hire permanent professionals to handle their operations. This in turn has
helped distribute wealth and increase income levels which has resulted in the working classes
seeking private banks that deliver more efficiency to the clients. This opens up a huge
opportunity for the HSBC in the Asian economy where they can tap in to a huge client base who
are seeking efficient banking services.
The regions banking clients are also seeking international expansion and expansion which results
in many preferring international banks which offer international services. This helps reduce the
transitions procedures and processes they would otherwise encounter interlinking the different
banks and performing international transactions. With HSBC having established its operations
across the globe, clients are capable of transferring funds globally faster and at lower transaction
changes. With proper planning there is huge opportunities for HSBC establishing itself in Asia
as this is a regions with several developing economies which invite globally established brands
which offer the regional businesses reach out to the global community.

How HSBC Perking Order May Be Affected by BREXIT

HSBC has enjoyed dominance in the banking sectors in the European union since its
establishment but the recent decision is expected to see the brand loose its pecking order
position. This has been explained above where the brand needs to now consider alterative
markets to expand their operations so as to avoid losing their global reputation. While HSBC is
likely to lose its market position in the EU, the brands name continues to remain well know and
recognized across the globe in developing and under developed nations which seek high quality
banking services. This makes it critical for the brand to consider developing a suitable marketing
plane for these markets so as to retain its market position.

Conclusion
BREXIT hopes to bring many benefits for the British people and economy but for certain
companies like HSBC which have their investments and operations in the European Union are
expected to experience huge losses. With little to options for HSBC to regain its market position
and glory in the European Union, the company has had to consider alternative markets to shift its
operation. Downscaling may be a temporary option for the company but over the long term
perspective, the company must consider regaining is market position on the global market.
Unlike the past when economies with weaker currencies were considered as less attractive, today
their economic power is clearly visible. Asian giants, China and India may have a low currency
rate but are classified as the fastest developing combines on the globe. While the currencies may
be low thus forcing profits to also be low, the profits are compensated by the sheer quantity of
clients and consumers in the nations. With proper planning, HSBC is highly likely to regain all
its losses by entering into the Asian market where investors are now searching for investment
opportunities. Many investors in Asia have surplus cash and are constantly looking for attractive
investments to make in every industry.

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