US Edition HSBC
646.1p -10.1p
Questor says Hold
Yesterday's strategy day was meant to demonstrate to the market how the solid but dull HSBC could put some zip in its return on capital, but singularly failed to inspire the market.
As Stuart Gulliver, HSBC's recently appointed chief executive, and 16 of the bank's top managers outlined their plans the share price fell, closing the day down 1.5pc.
While the strategy should not be judged solely on the short-term reaction of the market, it was striking that a day billed as heralding the beginning of a new chapter in the bank's life should have ended on such a note.
To understand why investors might not be prepared to wholeheartedly endorse Mr Gulliver's plans you have to look at what the bank's competitors are up to.
Take the push into wealth management. This is certainly a business the bank should be big in, but the announcement of the build up comes more than a year after Standard Chartered identified a similar opportunity and began hiring hundreds of relationship managers.
Making its own drive into the sector will in all likelihood cost HSBC dearly as it attempts to work towards annual revenues of $4bn from wealth management at a time it is trying to cut costs across the entire business by more than $3bn.
Or look at the bank's plans for its retail operations. Like Santander, HSBC has recognised that attempting to be "the world's local bank" brings enormous costs and that it is far better to operate in fewer countries, but in bigger size. Rival Santander's does not think it worthwhile entering a market unless it can be a top player.
But building big retail businesses is an expensive exercise and with Mr Gulliver not ruling out acquisitions the market is right to be cautious about the impact this could have on costs.
At the heart of the scepticism, though, is the issue of HSBC's culture. With nearly 300,000 staff in more than 60 countries and a senior cadre of managers consisting largely of people who have never worked at another bank, enacting meaningful change will be difficult.
Mr Gulliver has acknowledged the challenge and is right that doing nothing is not an option, but some are sceptical about whether the strategy he has outlined will deliver the change he is promising.
From an investment standpoint, the strategy certainly does not give rise to the conclusion that HSBC shares are a buy.
As the bluest of the blue-chip banks, HSBC remains a good hold as the reasons for its resilience remain in place as by far and away the most financially sound of all the UK's major lenders.
Mr Gulliver is a demonstrably smart manager and should certainly be given the benefit of the doubt for the time being as he tries to make HSBC into the bank it could and by all rights should be.
In the meantime, investors should bide their time and watch to see whether HSBC has set itself on the path fulfilling its promise.
Hold.