HSBC has initiated a review of its digital wealth business Pinnacle in China, focusing on expenses and operational controls.

This scrutiny could potentially lead to layoffs and represents a shift from the bank's previous growth plans for the unit, reported Reuters, citing sources.

The review of Pinnacle, which began a few months ago, examines staff salaries and potentially inflated supplier costs to address a surge in expenses that has surpassed revenue growth.

The review's findings, expected by the end of the year, could impact Pinnacle's workforce.

Launched in 2020, Pinnacle offers insurance and fund products and is a key component of HSBC's Asia-centric strategy.

The bank has invested heavily in the region, committing $3bn to Hong Kong and mainland China in 2021.

However, with new CEO Georges Elhedery at the helm, HSBC is tightening its belt as it anticipates a revenue drop due to impending interest rate cuts by central banks.

Pinnacle, which relies on digital platforms to extend HSBC's reach beyond its physical branches in China, has seen an investment of $390m since 2020.

The division boasted at least 1,700 personal wealth planners by June, with plans to increase this number to 1,900 by the end of 2024, despite an original target of 3,000 by 2025.

The review highlights the difficulties HSBC faces in increasing its revenue in the lucrative Chinese market, where its wealth and personal banking segment is yet to turn a profit, reporting a loss of $46m in the first half of 2024.

Earlier this month, HSBC also launched a wealth programme in Hong Kong to grow its wealth clientele by leveraging its strategic position to attract international customers.

With 80 million more middle-class and affluent people expected in Mainland China by 2030, HSBC sees a major opportunity to help them advance financially.

Currently, HSBC Hong Kong serves over five million clients.

"HSBC launches review of China digital wealth business Pinnacle " was originally created and published by Private Banker International, a GlobalData owned brand.

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