You are the wind beneath my wings... That's the message from Saudi Arabia to HSBC whenever it needs a big bank, according to the WSJ. Founded in Hong Kong and now HQ'd in London, HSBC is a banking beast (#7 globally). And despite Saudi Arabia's 2018 killing of Washington Post journalist Jamal Khashoggi and its controversial Yemen war, HSBC is standing by.
$65M in banking fees over two years... That's how HSBC is being rewarded for its loyalty. Since the Khashoggi murder, many banks and corporations have cut off business with Saudi Arabia. HSBC has turned its head and opened up its wallet.
- Investment banking: The Saudi state-owned oil company Aramco (aka the most valuable company in the world) got its bonds structured by HSBC this year.
- More I-Banking: HSBC helps the government issue bonds — Basically IOUs from the government — to help it handle inconsistent revenue from its giant oil business.
- Retail banking: After an expected merger, HSBC will own 29% of the 3rd biggest bank for basic Main Street-style banking in the Kingdom.
Higher risk = higher potential reward... Banks are in the business of calculated risks. There are conventional risks and unconventional ones, and HSBC is showing it's willing to take on both to make some $$$.
- "Credit risk": Banks lend money, taking on the risk they won't get paid back.
- "Investment risk": They also drop money into startups and new ventures, knowing they might completely fail.
- "Reputational risk": HSBC is on speed dial with Saudi Arabia, knowing it could be labeled an accomplice to murder in the court of public opinion.