HSBC begins year with Hong Kong branches closed, vandalised

HSBCis being drawn intoHongKong's political turmoil with protesters attacking some of itsbranchesand graffiti daubed on the famous pair of lions that guard its city-centre headquarters.

HongKongis the bank's single most important market, accounting for just over half of its $12.5 billion pre-tax profits in the first half of 2019, though with the protests tippingHongKong's economy into recession,HSBCand its peers are expected to take a financial hit.

Until now,HSBChad largely escaped direct involvement in the often-violent anti-government protests that have shakenHongKongfor more than six months even as other companies with perceived links to Beijing have seen premisesvandalised, including Bank of China (HongKong),HongKong's second largest bank behindHSBC.

But more recently,HSBChas drawn the ire of some protesters who accuse it of being complicit in action by the authorities against activists trying to raise money to support their campaign.

Protesters link the bank's closure in November of an account held by a group called Spark Alliance, which helps pay protesters' legal costs, to the December arrest of four Spark Alliance members on money laundering charges.

HSBChas strongly denied any connection.

"People are angry because they feel thatHSBChas stopped money getting to the protesters," one protester said on Wednesday, of the decision to close the account as he stood in a group taking photos of the damaged lions.

HSBCsaid in a statement after the arrests that the decision to close the account was "in accordance to international regulatory standards".

"Our decision is completely unrelated to theHongKongPolice’s arrest of the four individuals on 19 December 2019.Weclosedthe account in November 2019 following direct instruction from the customer," the bank said.

It is highly unusual forHSBCto comment on individual cases.

TwoHSBCbranchesand seven indoor ATM clusters wereclosedon Thursday, the first working day of theyear.

Some had their windows smashed and "support Spark Alliance" was spray painted on their walls during a NewYear's Day anti-government protest march. Others were damaged during protests on Christmas Eve.

Also Watch:Hong Kong kicks off 2020 fresh protests

The two lions were daubed with graffiti and briefly set alight after being doused in a flammable liquid.

HSBCsaid on Thursday initial cleaning of the lions had begun.

"We are engaging conservation experts to advise us on the professional restoration required and the process can take time," the bank said in a statement.

More than 90 per centof the $4.4 billion generated byHSBC's retail banking and wealth management unit in the six months to last June, came fromHongKong.

HSBChas also deployed billions of dollars in China’s southern Pearl River Delta region, adjacent toHongKong, and has expanded its services in the world’s second largest economy.

Beijing plans to integrate the Pearl River Delta andHongKongand Macau to create an economic powerhouse under its Greater Bay Area Initiative.

HSBC's entanglement in the protests underlines the tightrope that companies have had to walk since the protests got going in June in response to a now-withdrawn bill that would have allowed extraditions to mainland China, where courts are controlled by the Communist Party.

The demonstrations have evolved into a broad pro-democracy movement.

"Clearly, there is a fine line for management to draw between customers and the Chinese authorities,” said a head of corporate governance at a UK-based asset manager andHSBCshareholder.

OtherHongKongcompanies have been damaged by being perceived to be too supportive of the protests.

Cathay Pacific Airways was forced by Beijing to suspend staff involved in the protests, and chief executive Rupert Hogg and his top deputy resigned in August amid the turmoil.

HSBChas previously been targeted by supporters of Beijing.

Users of China's Weibo social media platform shared screenshots lastyearof anHSBCemployee's Facebook posts supporting the protests. The posts urged readers to complain toHSBCmanagement.

"Businesses now have to consider how three different groups will react to their decisions: The Chinese government,HongKongprotesters, and Chinese consumers," said Kent Kedl, head of Control Risks' Greater China practice.