HSBC Holdings' group chief executive officer Michael Geoghegan said yesterday that the global banking giant's Bermuda operation is a major contributor and he expects the business to grow.

In an interview with The Royal Gazette, Mr. Geoghegan, who was briefly on the Island for Monday's grand opening of HSBC Bermuda's new Harbourview facility, also went a step further than those predicting a V-shaped or W-shaped recovery — he believes it will be more like a VW.

As the man at the helm of a global financial network spanning 88 countries, Mr. Geoghegan is one of the world's most powerful bankers.

The Englishman joined HSBC in 1973 and has worked in North and South America, the Middle East, Asia and Europe and is now based in Hong Kong.

Mr. Geoghegan said Bermuda was punching above its weight in the HSBC group.

"It's one of the more major countries in the group, which might surprise some people," Mr. Geoghegan said. "Because it's small by geography doesn't mean it's small by contribution.

"We have 88 countries around the world and Bermuda is in the top 20 of those countries, so it is a significant part of our business. It is interlinked, both from a customer perspective with the rest of the group and from a people perspective, in that there are Bermudians working for us, not just in Bermuda, but in the UK, America and elsewhere."

Bermuda's ability to innovate and keep pace with the rapidly changing banking industry environment gave it good prospects for growth, he added.

"Bermuda's always reinvented itself in financial services — clearly financial services are going through some challenging times — but Bermuda, with its ability to adjust to those changes, is well able to add business," he said.

"We've put business here in Bermuda only recently and we can see that increasing as we go forward. So it's a core part of our business."

Mr. Geoghegan said the Harbourview building was "a model of what we're doing across the world in making Premier centres like you have here in Bermuda the forefront of our marketing, the forefront of our customer service. It is at the cutting edge of the 21st century in banking."

Asked about the economic turmoil of the past two years, Mr. Geoghegan said the difficult period was not over yet.

"I think it's going to be a VW recovery — not to be offensive to people who drive VWs — but it's going to be quite bumpy," he said. "We're going through a bit of a bump at the moment on the European side."

Concern has grown in recent weeks that the debt crisis in Greece could be replicated to some degree in other Eurozone economies. Portugal and Spain have already adopted austerity measures to rein in their spending and avoid fiscal Greek tragedies of their own. The new coalition government in the UK is also making clear its intentions to trim public spending.

Asked whether he was concerned about the Europe situation, Mr. Geoghegan said: "From a group perspective, I'm not concerned because we're not very large in Europe. Why aren't we large in Europe? The reason is that we could never see the return on equity in anything more than the high single figures, and our target rate is 15 to 19 percent return on equity.

"I am concerned because it's a big, tall order to make society cut back. The history of cutting back in Europe isn't very good. As far as I'm aware, the only country that ever achieved a cutback in Europe was Sweden.

"Whenever you cut back costs, wherever you are in the world, it has a social impact. We need to think that through. I'm sure there's excess in every government budget, as well as every corporate budget. But it's how you take that excess out. For that reason, I'm very concerned."

He felt the bank's conservative values had helped it fare better than many of its rivals during the credit crisis. HSBC was the only major UK bank not to take bailout money from the UK Government.

"HSBC has come through this remarkably well, but not surprisingly, because it was established in Hong Kong and Shanghai in 1865 and its cornerstone has always been that we take deposits first and then we lend," Mr. Geoghegan said.

"This crisis has been about a lack of liquidity in the banking system, hence leading to a lack of capital. HSBC has a tier one capital ratio [a key measure of a bank's financial strength] of 11.1 percent and loans-deposit ratio of less than 80 percent, so we're very, very liquid across the world.

"That's always been our strategy, since I started with the company 38 years ago, before that, and no doubt after me."

The horrors of the crisis eroded trust in financial institutions and blaming the banks has been very popular with politicians and the public alike. Consequently, financial regulation is tightening around the world. The HSBC boss has no fear of increased transparency, but feels it is essential that there is a coordinated international approach and reasonable preparation time for changes.

"I'm actually in favour of legislation and regulation that makes the financial services industry more transparent," Mr. Geoghegan said. "There are certain proposals going through the US legal system that may meet that criteria and the Basel III Committee is seeing what can be done in adjusting rules in Europe.

"I would say that whatever we do, let's do it globally so there's a common platform around the world, so people can't arbitrage the situation. When we roll it out, let's roll it out in a sensible time frame. If you are too fast and too restrictive, all it will do is to make banks stop lending further, which will contract the economy — and that will only give us another bump in the road."

Last year, HSBC decided to relocate Mr. Geoghegan to Hong Kong from London. The move, it said, was in line with its stated strategy to focus more on emerging markets. The group CEO anticipated that more than half the group's profits would come from emerging markets including China.

"Emerging markets are going to grow four times faster than the rest of the world," he said. "That's not my numbers — various studies show that. Trade is going to grow faster than domestic GDP. That's a fact.

"China is going to be one of the largest economies in the world. The speed of that size change is up for debate, but the outcome is not up for debate. Asia will be the biggest trading continent in the world. For that, we've got 60 percent of our business in Asia.

"But I don't rule out that the developed world will have a major role to play. I think it's part of HSBC's strategy to have links between the developed world and emerging markets. We have hubs in London, New York, Paris and Hong Kong, and they serve as pillars to our emerging markets business. Just as when we're doing business in Bermuda today, it may not be Bermudian, it may be from one of the emerging markets. It's the interconnectivity that gives us the advantage.

"So our strategy is a linked strategy that should result in 60 percent of our profits coming from the emerging markets and 40 percent from the developed markets."

HSBC's global network gave it a significant advantage over competitors, he added. "It's very hard, as a financial institution, to beat us. We're in 88 countries. Take our Premier product. There's no-one else who can really do that, giving you account details of what you have around the world on one piece of plastic. And to recognise you around the world, the credit rating you have in Bermuda, you can take to the next country you want to either visit or live in. Very few people can do that."

HSBC Bermuda CEO Philip Butterfield said the opening of Harbourview represented a "new era" in banking in Bermuda.

"I think our combination of superior customer service and excellent technology positions us to be able to serve our customers more effectively," Mr. Butterfield said. "We've also been engaged in extra training of the staff. The experience that customers are now able to have when they enter the Harbourview facility is going to be very different from what they had experienced before.

"We have ambassadors ready and willing to help customers, first, make more effective use of the technology and also to engage them in a more focused conversation with regard to their financial needs. It is a new era in banking and we believe it's going to be quite successful."