HSBC — one of the two most pivotal banks in the global financial system, according to regulators, alongside JPMorgan Chase — exudes permanence.

Its buildings are guarded by lions cast in bronze that passersby touch for luck. HSBC has never been bailed out, nationalized or bought, a claim no other megabank can make. It has not made a yearly loss since its foundation in 1865. While its peers took emergency loans from central banks in the crisis of 2008-10, HSBC, long on cash, supplied liquidity to the financial system.

Yet behind that invincible aura lurks an insecurity: Where is home?

When Western and Indian merchants founded the bank in Asia in 1865, they considered basing it in Shanghai before settling on Hong Kong. Faced with wars, revolutions and the threat of nationalization, the bank has chosen or been compelled to move its headquarters, or debated it, in 1941, 1946, 1981, 1986, 1990, 1993, 2008 and 2009.

HSBC believes its itinerancy explains its survival. Countries and regimes come and go. The bank endures. Now it's decision time again. The results of a 10-month review of its domicile are likely to be announced on Feb. 22. The main choice is between staying in London — where HSBC shifted its holding company in 1990-93, in anticipation of the return of Hong Kong to Chinese sovereignty in 1997 — or going back to its place of birth.

The decision is partly about technicalities: tax, regulation and other costs. But it also reflects big themes: London's status as a financial center, the dominance of the dollar and Hong Kong's financial, legal and political autonomy from mainland China, which is supposedly protected until 2047 under the pledge of "one country, two systems." HSBC's return would be a coup for China when its economic credibility is low. For Britain, the departure of its largest firm would be an embarrassment.

That HSBC is considering moving at this moment may seem astonishing; it is knee-deep in a restructuring. Since taking the helm in 2011, Stuart Gulliver has reversed the empire-building that took place in the 2000s to refocus the bank on financing trade. He has sold 78 businesses and almost halved the bank's exposure to the U.S. Vast sums have been spent on compliance systems after HSBC was fined for money-laundering in Mexico.

The group's return on equity hovers at 8 percent to 11 percent, poor by its standards but on a par with JPMorgan Chase. Outside Asia, returns are about 5 percent. To raise them, Gulliver is inflicting a new dose of austerity, with big cuts at its investment bank. Retreat from the Western hemisphere has freed resources for Asia, where risk-weighted assets have soared by half since 2010.

HSBC's seesawing skew toward Asia is one of four factors that explain its 151-year quandary over where it should be based. The others are the ethnicity of its managers, Britain's love-hate relationship with finance and the status of Hong Kong.

In the 1980s, all four pointed to London. The bank was diversifying into America and Europe (by 2004 Asia yielded just a third of profits). London felt natural to the cadre of expatriate Brits that ran it. Britain was welcoming, particularly after HSBC bought Midland, a local lender. And HSBC was cushioned from the danger that China would rip up the agreement over Hong Kong.

Three of the factors now point back toward Asia. Asia yields 60 percent of profits. This could rise to 75 percent. Gulliver plans a big push in China's Pearl River delta. Rising interest rates would boost lending margins most in Asia, which has a surplus of deposits, which need not be re-priced as quickly as debt. HSBC is far more Asian than its Western rivals. Not even a hard landing in China, a banking crisis there or a devaluation of the yuan would alter that.

In addition, HSBC's management is now multinational, although its board has too few Asians on it.

And Britain has gotten hostile. Briefly after the crisis, public and elite opinion distinguished between the British banks that blew up and those that did not. Having a bank so plugged into emerging markets was seen as strategically helpful. But now HSBC (cumulative profits of $101 billion since 2007) is often lumped in with the likes of Royal Bank of Scotland (cumulative losses of $80 billion), a target of attacks from foaming parliamentary committees and a hatchet-wielding media.

Critics worry that British depositors and taxpayers subsidize the bank by funding its foreign operations and implicitly guaranteeing its liabilities.

What about the fourth factor, Hong Kong? It has changed a lot in recent decades. The skyscrapers of China's opaque lenders, Bank of China and ICBC, now loom over HSBC's building, beneath which prodemocracy protesters camped during the Occupy Central movement.

A move to Hong Kong is a risk for HSBC. It is a bet that China will grow, but that its legal and financial systems will remain backward enough that Hong Kong will still have a vital role as the mainland's first-world entrepôt. It is a bet that mainland officials will ultimately respect the principle of "one country, two systems."

In Hong Kong, HSBC would be a catastrophic mistake away from losing its independence — but then the bank has never made a catastrophic mistake. Viewed from an insular Britain, Hong Kong is dangerous and alluring, just as it was 151 years ago.





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