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UK Banking Services

Discuss ;UK Banking Services, Challenges, Opportunities and Market Strategies for

Growth and Future Expansion – HSBC Bank.


Banking is currently the major financial service sector in Britain. The banking industry in the UK
is the third largest in the world after Japan and the US in terms of the returns on capital,
dynamism and overall efficiency. The city of London is one of the world’s largest financial
centers. Britain currently has five major Banks and financial companies that controls its entire
financial market sector. These are JPMorgan Chase and company with a market capitalization of
191.01 Billion British pounds, followed by HSBC Holdings plc with 136.55B, Lloyds Banking
Group plc with 48.21B, Banco Santander, S.A., 42.75B and finally Barclays PLC with 37.88B.
Taking HSBC as the Bench mark company for comparison purposes as concerns the
performance, challenges and the opportunities of the banking industry in the UK financial and
the Banking sector. HSBC is derived from the initials of Hong Kong and Shanghai banking
Corporation which founded HSBC in the year 1865 in Hong Kong and later changed its
headquarters to London in 1991. It’s the second largest listed company in the London Stock

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Exchange after the Royal Dutch Shell trading company. It’s also listed in various other stock
exchanges across the world including New York Stock Exchange. (Berger, 2010).
The major challenge of the entire banking sector stems from malpractices in management and
the economic conditions that lead to massive and unprecedented financial meltdown mostly due
to over lending, excessive borrowing and poor regulation. The current system of financial
regulation is either entirely flawed or grossly inefficient to control such incidents from occurring.
(Drucker, 1999)
In the year 2008, the British government used 500 Billion British pounds to bail out banks that
were about to collapse in UK due to the effect of the global financial crisis. Had it been allowed
to go on without the intervention of the UK government then it would certainly have had a
catastrophic effect on the UK economy. A year later, the UK government added another 50
billion dollars to the banking industry to stabilize its financial position. The effect of the financial
crisis led to massive drops in the banking industry’s income. HSBC operating income dropped
by a massive 26% in the year 2008 and later by another 65% in the year 2009. Customer
confidence in the banking industry was at its lowest as the banking profits took a nose dive for
the worst.
The major advantage or strength of the banking sector in the UK economy is that it touches
every sphere of the economy and also on every kind of business or trading activity. The failure of
the Banking system in the UK would have led to a near collapse of the entire UK economy
where thousands of jobs and economic life line of many British people would have been lost or
grossly affected.

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HSBC is a multinational bank with over 7200 offices in more than 85 countries worldwide and
over 89 million customers. It currently enjoys a 24.6% annual revenue growth rate and 13.95%
annual long term growth rate. www.yahoo,finance HSBC has offices in almost every financial
capital in most parts of the world. Its strength in the banking sector cannot be ignored especially
in the UK. With this kind of strength, HSBC has a lot of opportunity to develop new markets and
expand its services in other regions and also to consolidate its position on the UK market.
(Brealey, Myers and Allen, 2006)
The major weakness in the banking sector is the shortage of talent. Top quality and well trained
personnel are becoming more valuable, difficult to source and even more to train. The existing
link between target performance and remuneration are critical issues in senior staff recruitment.
The banking sector needs new strategies to attract, create incentives and retain highly qualified
professionals.(Khan, 1993)
HSBC strategic marketing would involve a strategy that will substantially broaden and expand
the scope of all its profitable units or portfolios in terms of customer grouping and functions
together with alternative innovations in technologies to improve the general performance. HSBC
should taking advantage of any opportunity or advantage of any gap in the market, identifying
and making use of competitive advantage against their competitors and increasing its market
share. (Porter, 1990)
The major differences among the top four banks in the United Kingdom, i.e. Barclays, Lloyds
TSB, NatWest, Royal bank of Scotland, Santander, and HSBC are mostly based on customer
service products. Barclays offers free overdraft up to 3000 British pounds, for the first three
years and 1000 pounds for three years. It later charges an interest rate of 14.9% for additional

UK Financial Services Sector 4
overdraft facility. Lloyds bank has similar terms only the interest rate charged on additional
overdraft is higher than Barclays i.e. it charges 16.77%. NatWest Bank offers free overdraft up to
2000 pounds for a year and 500 for three years later it charges interest at 17.81% for any
additional overdraft. Santander also charges overdrafts the same as NatWest only that it charges
no interest on delayed overdrafts. Royal Bank of Scotland also offers free overdraft up to 2000
pounds for a year and 1000 pounds for three years later it charges interest at 9.9% for any
additional overdraft. HSBC offers free overdraft up to 1500 pounds for a year only and charges
19.9% interest rate for any additional overdraft.

Gap 1: (The knowledge gap)
The nationwide consumer index shows a decrease in consumer confidence. This is a clear
indicator that consumer trust and therefore perception of the industry is lower than previous
HSBC needs to consolidate all its efforts in rebranding itself following the near collapse of the
banking industry in the UK. HSBC needs to reassure its customers about the stability of the
bank. In fact, HSBC was never bailed out by the UK government during the 2008 – 2009 global
financial crises; it funded its own recovery in the UK with monies from other branches

UK Financial Services Sector 5
worldwide which totaled to 750 million British pounds. It needs to communicate its business
position i.e. its economy strength to its consumers and educate them in its unique position as a
UK high street bank. More advertising will be needed to express its freedom from public
funding. (Vance, 2003)
Gap 2: (The Policy Gap)
I have checked some HSBC consumer Forum and found out that most customers receive cards
via postal service. The facts show there is likely to be an important gap between bank and
consumer perception
HSBC must make use of the modern ways of communication. If the cards are valuable like the
Automated Teller Machine Cards then care should be taken to avoid instances where the cards
may fall in the wrong hands. They may use a more reliable postal service, rather than the royal
mail. Also, more reliable channels must be established and possible internal breakdowns
identified. Alternatively, the bank may send the cards to the nearest branch where the client can
pick the card on their own directly from the bank.
In conclusion, the banking sector in Britain is critical to the proper functioning of the UK
economy. For the future survival of UK banking sector a lot of restructuring needs to take place
so as to avoid future need of government intervention in terms of financial bailout. The adopted
strategy should emphasize cost reduction in relation to competitors, sales and cost of sales, and
the operating income.

UK Financial Services Sector 6

Porter, M. (1990). The competitive advantage of nations, New York. Free Press

Berger A. (2010). To What Extent Will the Banking Industry be Globalized? A Study of Bank
Nationality and Reach in 20 European Nations
Vance, D. (2003) Financial analysis and decision making: tools and techniques to solve
financial problems and make effective business decisions. New York: McGraw-Hill.
Drucker, F. (1999) Management Challenges of the 21st Century. New York: Harper Business,
Khan, M. (1993). Theory & Problems in Financial Management. Boston: McGraw Hill
Higher Education.

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Brealey, A., Myers, S and Allen, F (2006) Principles of Corporate Finance, 8th Edition.

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