HSBC is said to make a U-turn on its credit
card loan growth strategy in Thailand and sell its business to Bank
of Ayudhya.

A year ago,
HSBC
had confirmed to Thai media that it targeted an expansion
of its credit cards and personal loans business, after the local
government relaxed restrictive banking rules.

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Credit cards and personal loans are the core
focus of HSBC’s retail banking business in Thailand.

The bank aimed to double its loan portfolio
and grow its credit card loans by 15% by the end of December,
Wichit Phayuhanaveechai, head of personal financial services at
HSBC Thailand had said in January last year.

Phayuhanaveechai had also said that there was
no particular focus to grow the number of its credit card holders,
which at the time amounted to 500,000.

Reuters reported on 12 January that Bank of
Ayudhya, in which General Electrics has a 33% stake, was going to
sign an agreement before 20 January to target growth in its own
credit cards and personal loans business.

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Not that surprising

The fact that HSBC is making a U-turn is
actually not that surprising:

Four months after announcing its growth
ambitions in the cards sector in Thailand, the bank confirmed a new
group-wide retail banking strategy, which would see it divest of
businesses in markets it considered unprofitable.

At the time of the announcement of the new
strategy, its Thai business was not highlighted as neither
unprofitable, nor profitable.

But just a week after the new retail banking
strategy was announced, HSBC CEO Stuart Gulliver expressed
dissatisfaction with the performance of the bank’s retail banking
operations in India and China – two countries the bank had
highlighted among 18 countries where HSBC is going to target
stronger focus in retail banking on 11 May.

So a U-turn in Thailand is not that
surprising.

By focusing on the most profitable markets and
businesses, HSBC plans to cut its annual costs by 42% – or $2.5bn –
to $3.5bn and targets an expense to revenue ratio of between 48% –
52% (compared with last year’s 55%) by 2013.