*

Managers focused on growth after complex transformation

*

Europe headcount slashed from 17,000 to 10,600

*

International clients expected to boost European revenue

By Sinead Cruise and Lawrence White

LONDON, April 8 (Reuters) - HSBC's ( HSBC ) European

chief is betting on rising regional wealth and overseas

expansion by Asian corporate clients to boost his unit's

contribution to group profit after a multi-year reboot turned

the business from laggard to profit engine.

The turnaround in Europe, some details of which are reported

here for the first time, has helped HSBC ( HSBC ) overcome investor

scepticism about its "network strategy" after a 2022 campaign by

number one shareholder Ping An Insurance Group of China

raised questions over whether HSBC's ( HSBC ) fast-growing

Asian business was being held back by its outsized presence in

slower-growth Western markets.

At the core of the strategy is the notion that big corporate

clients in Asia, many of which already borrow from HSBC ( HSBC ), will

use a wider range of its services in Europe as they expand into

the region, as well as tapping it for advice on local deals and

fundraising.

Beside profiting from Europe-bound revenue from other HSBC ( HSBC )

hubs, the bank wants to increase income from

ultra-high-net-worth families, Colin Bell, chief executive of

HSBC Europe, told Reuters in his first interview since taking

over the role in February 2021.

"With international wholesale banking at the core, we are so

much more targeted from a strategy point of view," Bell said,

pointing to a rise in return on tangible equity to 6.7% in 2023

from below 1% in 2019 at HSBC Europe, which contributes just

under a tenth of HSBC's ( HSBC ) overall profit.

"We're starting to see the results of all that work in the

numbers."

Ping An called on the bank to spin off the more profitable

Asia business, but other investors rejected the demand.

Alastair Ryan, an analyst at Bank of America, said investors

have stopped questioning the bank's network strategy, for now.

"People take it as just obviously true that companies are

better off having somebody who can do their trade finance, do

their foreign exchange payments, cash management, all their

cross-border transactions."

INCREASED PROFIT

Bell, a former British army officer who joined HSBC ( HSBC ) in July

2016, was given a mandate to turn around the long-struggling

European business.

Between 2019 and 2023, HSBC Europe grew annual profit before

tax to $2.6 billion from $1 billion, Bell said. A big chunk came

from shrinking headcount, to just 10,600 from around 17,000 with

the offloading of businesses such as its French retail banking

unit.

It also increased revenue originated in Europe but booked

elsewhere in the bank's sprawling global network by 40% to $3

billion in 2023 compared to 2022, Bell said.

Bank of America's Ryan said rising interest rates have also

lifted income from the bank's vast $1.7 trillion worldwide

deposit base, which powers its international strategy.

It may prove harder for the Europe unit to continue growing

at the same pace. A campaign to attract more European business

under the internal slogan "Europe means business", reported on

by Reuters in June 2019, was largely seen as a failure as

cross-border collaboration with other regions was slow to

materialise, sources at HSBC ( HSBC ) have said.

Headwinds have become stronger. Competition for European

business among banks like BNP Paribas, Deutsche Bank

and Santander is hotting up. The war in

Ukraine and tensions between China and the West may also stymie

corporate activity.

FRESH FOCUS

Bell, however, is confident there is more business to be

done. Bullish clients with idle capital in Europe may look to

grow in places such as Southeast Asia as supply chains

reconfigure, he said.

"We are well placed to support (clients) as they look to

navigate uncertain conditions in Europe with expansion

elsewhere," he said.

Firms from India, China and other parts of Southeast Asia

are also looking westward for new opportunities, Bell added.

The bank will look to increase assets under management at

its Swiss-based wealth unit by 50% or around 40 billion Swiss

francs ($44.3 billion) over five years, Bell said, prioritising

ultra-high-net-worth clients.

To achieve the target, former UBS executive Gabriel

Castello, appointed to run that business in June 2022, is

expected to lean on the bank's corporate banking relationships.

Further growth is eyed at HSBC's ( HSBC ) Channel Islands and Isle of

Man business, where assets under management are expected to

increase by around 70% in five years and targeted recruitment is

underway.

"We've been going through a complex, intense transformation

in Europe for the last three years," Bell said.

"So now it's time to meet clients and have the right

conversations about the capabilities we've got."

($1 = 0.9031 Swiss francs)

(Editing by Kirsten Donovan)