HSBC has dismissed suggestions that it might relocate its headquarters from the United Kingdom in response to anticipated tax increases scheduled for the upcoming Wednesday budget. Chief financial officer Pam Kaur stated there is currently no pressure from shareholders, particularly those in its crucial Hong Kong market, to depart from London, despite widespread industry concerns that higher levies could push major financial institutions to move operations abroad. HSBC has a strong shareholder base in east Asia, where it makes the bulk of its profits, and has twice been pushed to shift or split its operations in reaction to UK policies. When growing regulatory burdens and a new bank levy led HSBC to consider shifting its headquarters out of London to Hong Kong, that includes in 2015. HSBC later faced pressure to separate the bank’s profitable Asian business from the rest of its operations in 2022, amid anger that the UK had forced the bank to cancel its dividend during the first Covid lockdown.
During a media briefing on Tuesday, Kaur affirmed the bank’s stability and commitment to its home base. “Irrespective of what happens on taxes, we are there to support our customers, and that is what we will do,” she said, adding that the bank is comfortable with its current domicile and the question of a relocation is simply not under consideration.
She also offered support for the government’s growth agenda led by Chancellor John Healey and Prime Minister Andy Burnham, noting that the institution will monitor the reactions of its business clients and customers moving forward. He is likely to reverse the previous Conservative government’s cuts to the bank surcharge.
The declaration followed the lender’s disclosure of a 32% rise in third-quarter profits, reaching $9.6bn (£7.2bn). The bank also announced plans to return $2.7bn to its shareholders through a combination of dividends and share buybacks. Despite these strong financial results, the bank’s shares on the London Stock Exchange dropped by nearly 6% on Tuesday morning, as investors reportedly anticipated higher projections for net interest income. However, its UK-listed shares plunged almost 6% on Tuesday morning, threatening its status as the biggest company on the FTSE 100.
HSBC reported that its net interest income climbed to $9.3bn for the third quarter, compared to $8.8bn in the same period last year. The bank attributed this growth to effective hedging strategies and an increase in Hong Kong-based deposits, even as UK deposit levels remained stagnant. This specific metric has become a focal point for organizations like the Trades Union Congress (TUC), which argues that bank profits have been fueled by high interest rates rather than operational efficiency.
TUC general secretary Paul Nowak criticized the banking sector, suggesting that these high earnings confirm that banks possess the capacity to absorb higher tax burdens. He noted that finance lobbyists have attempted to block budget tax hikes, yet the latest results demonstrate their ability to contribute more to the economy. Similarly, New Economics Foundation economist Abhijay Sood characterized the profit growth as difficult news for households currently grappling with surging mortgage expenses.
Sood further argued that bank profitability has benefited from keeping savings rates low and receiving indirect support from taxpayers through Bank of England policies.
He suggested that while potential tax changes in the budget are a positive step, the government should consider more aggressive measures to claw back such subsidies to fund public investment.
These debates occur against a backdrop of ongoing tension, as other industry figures, such as JP Morgan’s Jamie Dimon, have previously warned that a hostile tax environment could force banks to reconsider their footprint in the UK, with some high-net-worth individuals already signaling an exit due to current policy trends. According to a handful of wealthy businesspeople have already, They are leaving the UK, with some criticising Labour’s tax policies.
