• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Doug Kass
    • Bruce Kamich
    • Jim Cramer
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • Trifecta Stocks
  1. Home
  2. / Investing
  3. / Stocks

Tyme for Asia as HSBC and South African Online Bank Expand

Europe's biggest bank, HSBC, is in an impossible political situation, caught between London and Hong Kong. South Africa's TymeBank will have it easier expanding into the Philippines.
By ALEX FREW MCMILLAN
Feb 24, 2021 | 07:30 AM EST
Stocks quotes in this article: HSBC

The bank HSBC (HSBC) has bent over backwards to keep the leaders of the Chinese Communist Party happy. It's very clear why, after the bank announced it would intensify its shift to Asia, moving the heads of several key business lines to Hong Kong from London.

Britain's biggest bank is also well down the line in offloading its U.S. retail banking operations. It wants to sell that 150-branch operation, keeping its U.S. corporate and investment banking, and is also close to shedding its 200-branch consumer bank in France.

It is not alone. The South African online-banking startup TymeBank is making the Philippines its first major overseas market for expansion. TymeBank is selling minority stakes in the company to the Filipino conglomerate JG Summit and the British private-equity group Apis Partners. That has raised US$108 million to fund the South African company's Asian push.

Banks both big and small are focusing on Asia, in other words, the part of the world with the strongest growth. It's a seismic shift. Banking is by nature a pretty boring business. You hardly expect revolutionary change to come from within the industry. So it's a process that comes as the banks follow their customers, and where economies are strongest.

HSBC is the largest European bank by assets and market capitalization, and among the 10 biggest in the world. It's technically based in London, but listed both there and here in Hong Kong, where it got its start. The Hongkong and Shanghai Banking Corp. started life with one branch along the Hong Kong waterfront in 1865, funding trade between Europe and Asia's bustling port cities.

On Tuesday, it said 2020 pre-tax profits were down 34% to US$8.8 billion, from US$13.3 billion in 2019. To be honest, it was better than expected, and the bank is still making good money during a horrible pandemic and recession. Of the profits, 90% come in Asia. Revenue last year fell only 8%, to US$50.4 billion.

There has recently been plenty of tension between the U.K. regulatory and political oversight it must endure, and pressure from Beijing, which it must keep happy so it can continue to make money in China. The bank is also looking to expand its presence in Singapore.

Singapore is benefiting from a flood of private capital as rich Hong Kongers look to move money out of town. The Communist Party has embarked on a draconian crackdown in Hong Kong, revealing its hand as a brutal enforcer that will cut down any critics, large or small, and tolerate no political dissent. Tuesday it announced changes to ensure all civil servants and political candidates, big and small, must be "patriots," by which the Communist Party essentially means they must love the Communist Party. It's a sign that the Communist Party will bar pro-democracy candidates from running in upcoming elections, and in fact wants one-party rule. Beijing's lackeys in the Hong Kong government will be itching to remove district councillors after pro-democracy candidates swept those small-scale elections across the territory in November 2019, at the tail end of the anti-government protests here. Citywide elections for congress were delayed by a year due to the "pandemic." Of democracy.

HSBC prominently allowed its Hong Kong CEO to be photographed signing a petition in support of a terrible "national security" law, which inhibits civil liberties in all manner of ways, and allows the Chinese secret police to operate unhindered in Hong Kong. Since its passage, without the input of any Hong Kongers at all, the law has been used to round up hundreds of dissidents and critics of the Communist Party, wrapping them up in incessant court cases about obscure or fringe infractions.

The British bank is in a tough spot, for sure. The hard-line pro-Beijing former chief executive of Hong Kong, C.Y. Leung, pointedly asked on his Facebook page why this foreign interloper should be allowed to make so much money in Hong Kong if it itself doesn't demonstrate the right kind of patriotism, too.

HSBC has frozen accounts of activists in Hong Kong as well as charity accounts raising money to support democracy activists facing criminal charges. It is not clear that its deference to Beijing accomplishes much.

HSBC is also under fire for handing over a PowerPoint presentation to U.S. authorities that is the basis of the case against Huawei heir and CFO Meng Wanzhou. That presentation, U.S. authorities allege, shows how she downplayed or disguised Huawei's ownership of Skycom Tech, a Hong Kong telecom supplier that had business dealings with Iran, in contravention of U.S. sanctions. Reuters reports that Skycom used the Huawei letterhead and name on a proposed sale of Hewlett-Packard computers to the Mobile Telecommunications Co. of Iran, which would amount to selling U.S. goods to Iran. Skycom was actually owned as a subsidiary by Huawei, U.S. authorities claim, while Meng told HSBC bankers it was just a business partner -- a key point, because U.S. banks should not process transactions for a company that is contravening U.S. law and doing business with Iran.

Phew. The British courts ruled HSBC was just doing its job when it handed over the PowerPoint, which Meng presented during a power lunch in Hong Kong. Still, British politicians hauled the bank's CEO, Noel Quinn, and chief compliance officer, Colin Bell, before the foreign affairs committee to explain, politely, why the heck the bank is being so supportive of Beijing's repression in Hong Kong.

The bank is caught in an impossible spot, but it very clearly will favor a Beijing-leaning stance if forced to make a choice. In announcing its earnings, it said is moving Greg Guyett, the co-head of global banking and markets, as well as Nuno Matos, the chief executive of wealth and personal banking, and Barry O'Byrne, the chief executive of commercial banking, to Hong Kong. These are the areas where it makes its money.

HSBC is attempting to intensify its fee-based income and reduce its dependence on interest-rate-related revenue. Wealth management is huge business in Asia, which it will serve both in Hong Kong, the money center for East Asia, and in Singapore, the financial capital of Southeast Asia. The bank said on Tuesday it will invest US$6 billion in Asian wealth management and whole banking over the next five years.

Its earnings weren't great but weren't awful, either. In another point of East-West tension, the bank is being sued by retail investors here in Hong Kong for eliminating its dividend last year, a move it had to make at the direction of U.K. banking regulators. It says it will now resume paying a small dividend, of US$0.15 per share for 2020, although the level for 2021 will only be evaluated at its half-year results in August.

HSBC says it aims to resume a dividend payout ratio of 40% to 55% of profits from 2022 and beyond. Many pensioners here in Hong Kong have held HSBC shares for their dividend, those regular cash payments supplementing the scant social welfare here, which explains the shareholder revolt.

HSBC has been a terrible holding for shareholders of late. It used to be a fairly accurate measure of the strength of the Hong Kong stock market as to how much above HK$100 that HSBC shares were trading. They ended Wednesday at HK$46.10, which forced me to double check they had not enacted a share split. Nope. They're down from HK$150 in October 2007, just before the Global Financial Crisis.

For better prospects of fast growth, investors will want to watch the development of nimble nascent online banks like Johannesburg-based Tyme. No need to cut bank branches when you don't have any.

TymeBank ("Take Your Money Everywhere") has a deal with one of South African's largest grocery-store chains, Pick n Pay, to run self-serve kiosks in its grocery stores, as well as in Boxer Superstores. The bank, mainly operating on your smartphone, is proving a blessing to the many South Africans who don't have access to a conventional bank account.

I love that business model for emerging markets. So it makes perfect sense for TymeBank to expand into nations like the Philippines, a similar-sized economy to South Africa, at a similar stage of development.

Tyme will form a joint venture with the Gokongwei family's JG Summit conglomerate, and is applying for a digital-bank license from Manila. Thanks to cheap fees and ease of use, it has signed up 2.8 million customers since it secured its banking license in South Africa in February 2019, the first cloud-based bank to do so. It's adding 110,000 new customers per month in South Africa, and the Philippines has twice the population of its home nation.

London-based Apis, which specializes in backing fintechs and microlenders, will own around 15% of Tyme via the Apis Growth Fund II. JG Summit will own around 5% of Tyme. The South African bank was launched by the South African mining billionaire Patrice Motsepe and his Johannesburg-listed investment company African Rainbow Capital (JSE:AIL).

There will come a time -- a ha ha! -- when Tyme will go public in its own right, but for now investors can get indirect exposure that way.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.
TAGS: Investing | Markets | Politics | Stocks | Banking | Financial Services | Asia | China | Africa

More from Stocks

Market's 'Superficial' Highs Are Only Skin Dip

James "Rev Shark" DePorre
Apr 9, 2021 4:36 PM EDT

You can't call this market overbought when so much of it isn't participating.

Pinterest: Double Top or Breakout Pending?

Bruce Kamich
Apr 9, 2021 3:00 PM EDT

What would I do in this case? Here's the logical choice.

I'm Continuing to Build a Position in Skillz

Timothy Collins
Apr 9, 2021 2:24 PM EDT

SKLZ shows explosion moves to the upside when it emerges from the oversold area.

Royalty Pharma Shows Promise

Bruce Kamich
Apr 9, 2021 1:10 PM EDT

Here's how traders should play RPRX right now.

Making the Best of the Peculiar Market Action

James "Rev Shark" DePorre
Apr 9, 2021 12:17 PM EDT

Trading in biotech stocks and a particular SPAC play are on my mind.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 04:44 PM EDT PAUL PRICE

    Pretty Incredible + Hard to Believe

  • 11:18 AM EDT JAMES "REV SHARK" DEPORRE

    This Weekend on Real Money

    The 5 Pillars of Exceptional Trading
  • 08:05 AM EDT BOB LANG

    Bitcoin vs. Gold: Which Should You Invest In Now?

    Read my article TheStreet here!
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2021 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login