Benoît Theunissen: Niccolo Polli, you left your position as country CEO of HSBC Luxembourg in March to take up the position of head of strategy & planning Europe. What is your take?
Niccolo Polli: Between the time I took over as CEO of HSBC Luxembourg in December 2018 and now, the situation has largely changed. There were question marks over the role and purpose of Luxembourg within the group. I was appointed to define the purpose of HSBC’s presence in Luxembourg in the context of our continental European strategy. When I arrived, there were five resignations, including the CEO, the COO, the head of audit and the head of compliance. So my role was to make sure that the operations were working, to restore credibility within the group and to make sure that the purpose of Luxembourg was understood.
What role does Luxembourg now play within the HSBC group?
Polli: We are completely repositioning HSBC in the continental European region. The first thing we need to do is to focus on our strengths. We have a markets hub in London and wealth offering across Europe. At the same time, we are selling our retail banks in France and in Greece. We are repositioning ourselves in private banking, with Luxembourg taking over the private banking business of HSBC France. The aim of this restructuring is to transform ourselves into a truly commercial bank. Luxembourg therefore has become one of the top three countries in terms of importance for our European proposition.
Emanuele Vignoli: HSBC Luxembourg plays a strategic position within our European and Global franchise. Niccolo mentioned the acquisition of the French portfolio which will double the size of our private banking business in Luxembourg. This is not just a simple acquisition of the client portfolio, as we are also deploying cutting-edge technology through the Blackrock Aladdin management platform that will help us deliver new solutions to our clients and focusing on advisory and investment activities for our private banking clients. Additionally, whilst the completion of this project is key for us this year, we have also launched our Commercial Banking proposition to drive inbound business and we keep strengthening our Securities Services offering on the ground.
Niccolo Polli, head of strategy & planning Europe at HSBC, stresses the importance of focusing on the group’s strengths. Photo: Guy Wolff/Maison Moderne
Why did you opt for a repositioning towards commercial and private banking at the expense of retail banking?
Polli: Our main objective is to connect our clients globally. Commercial banking fits perfectly with this objective, as does private banking. For example, we have a lot of private banking clients in the Middle East. Their wealth is very closely linked to their often complex businesses. When they come to us to open a new account, we can respond more quickly because of KYC, as we have already mapped all their families. If they went to another bank, it would take several months to open an account, whereas with us it would take only a few weeks. This is an advantage when it comes to banking as quickly as possible. KYC is just a part of this. The bigger point of global connectivity is about seeing the big picture of their business and also their personal needs. We can serve our clients better because we can service their needs across the globe.
Vignoli: Retail bank was never in the Group strategic plans for Luxembourg, our strengths are aligned to group and local market needs hence the decision to keep investing in our private bank, commercial bank and securities services\asset management proposition to help our global clients thrive and grow their businesses in line with their footprint."
We launched our commercial banking offering in May 2022.
What about your securities services business?
Vignoli: This is another focus area where we are a European hub together with Dublin. We target asset owners and managers with a comprehensive proposition which includes custody, depot, fund admin and accounting as well as transfer agency. We are investing across all products and leading the way with a global distribution model in partnership with a large player in the market. We have now reached €300bn in assets under management and we expect to grow at 10% per annum.
Emanuele Vignoli, in your role as the new country CEO for Luxembourg, what are your priorities in terms of repositioning the continental Europe strategy?
Vignoli: My first priority is engagement with regulators and continue to invest in our internal risk and control framework to ensure we maintain high service standards to protect our organisation and customers. The second point is around execution, given the large change agenda that we have planned for this year, which includes the private bank acquisition from our French branch, deployment of digital solution in the cash management space, complete the integration with large partners on the Securities Services front and at the same time we decided to add an office move to Cloche d’Or! Thirdly I would say organic growth: we must leverage this year’s investment to safely grow our book of business and wallet share across all business lines over the short term.
When I arrived at the end of 2018, we were opening 200 accounts a year, this year we will exceed 1,000, a fivefold growth.
How is this new vision accompanied by investment in resources?
Polli/Vignoli: We are investing circa €30m in IT platforms in Luxembourg and also upskilling and growing our staff in key areas within front office. When Niccolo arrived at the end of 2018, we were opening 200 accounts a year, this year we will exceed 1,000, a fivefold growth. However, this does not mean that we are increasing our human resources by a factor of five, as our account openings take place in our centre of excellence in Krakow.
The aim is clearly to position Luxembourg as a front office and to minimise the operational resources involved in onboarding clients
Vignoli: The objective is clearly to position Luxembourg as a front office and to minimise operational resources related to onboarding clients, taking maximum advantage of our offshore centre in Krakow. All investments in staff in Luxembourg are therefore focused on investment product specialists who interact directly with clients.
In his new role as country CEO of HSBC in Luxembourg, Emanuele Vignoli says that one of his first areas of focus will be investments in control and compliance. Photo: Guy Wolff/Maison Moderne
In the light of the current global macroeconomic instability, how are you positioning yourself with clients?
Polli: Luxembourg has the advantage of being one of the few countries with a triple A rating. In addition, HSBC is one of the most stable banks. In a context of volatility and uncertainty, there is nothing like putting your money in a stable bank located in a triple A rated country to protect it. Moreover, Luxembourg is a well-governed jurisdiction. Just look at its low debt-to-GDP ratio [editor’s note: this indicator stood at 21.84% on 31 May].
Vignoli: This stability is essential for our clients, who are mainly corporates. They use their accounts to manage their day-to-day business and optimise their cash flow. Liquidity is needed for emergency situation, to fund investment plans, mergers and acquisitions, hence the importance of giving our clients full transparency and easy access to their funds across multiple global locations. So a stable tripe A country like Luxembourg and a very stable international bank are the perfect match for our strategic approach to meet client needs. Also, despite the macroeconomic context, growth is exponential and we are looking to add 50% more business than last year.
We're very interested in the metaverse, not so you can buy a property next to Snoop Doggy Dog, but because it’s resulting in a multitude of real-world applications that enable more appropriate communication in virtual spaces
Polli: From our point of view, we are traditional bankers, adopting a conservative stance. On that basis, we generally benefit from crises. We get a lot of extra business because we don’t live on hype. To illustrate our conservative approach, cryptocurrencies are outside our risk appetite though we can provide sophisticated clients exposure if they want. We do consider digital currencies developed by central banks to be important. As another example, we are very interested in the metaverse, not so you can buy a property next to Snoop Doggy Dog, but because it leads to a multitude of real-world applications that allow for more appropriate communication in virtual spaces. Taking a conservative approach does not mean that we are not innovative. It just means that we are very choosy about our investments.
This article was published for the Paperjam + Delano Finance newsletter, the weekly source for financial news in Luxembourg.. Read the original French version of this interview .