Client Cull

At HSBC, about half of its 3,000 financial institution customers across the currency, debt, equity and trade finance businesses have been cut in the past 18 months, a person with knowledge of the matter said. Europe’s largest lender also created a group of less than 200 institutional and other financial clients that are its highest priority.

Even smaller banks have come up with their own client lists targeting a select number of investment firms, with Stifel Financial Corp. dubbing a roster of 21 top-tier targets as its “Blackjack” list. Chief Executive Officer Ronald Kruszewski, whose firm bills itself as the biggest provider of equity research in the U.S., said in an interview that his equity sales unit had compiled such a list about three years ago, but that it’s currently not in use.

“I would be surprised at any firm that is trying to sell a product that didn’t have a list,” Kruszewski said.

In some ways, the banks have little choice.

In the post-crisis world of stricter regulations and rock-bottom interest rates, banks are struggling to boost profitability. Income that commercial banks get from making loans has slumped, while new rules have made it much harder to earn easy money from trading bonds, currencies and commodities -- long the biggest source of industry profits -- by curbing the firms’ risk-taking and forcing them to hold more capital.

Little Choice

At the biggest investment banks, revenue from fixed-income sales and trading fell to $61.8 billion last year, the fifth decline in six years, according to Bloomberg Intelligence. While Wall Street ultimately eked out a record year of earnings by slashing jobs and cutting costs, most firms failed to generate a return on equity of at least 10 percent -- a key measure of profitability.

Things haven’t been much better in 2016. In the past month, both Citigroup and JPMorgan Chase & Co. warned total first-quarter trading revenue will drop. Credit Suisse Group AG CEO Tidjane Thiam said Wednesday the bank will be “more selective on client coverage” after incurring losses tied to fixed-income trading positions.

“Everyone is talking about how you go about” boosting profitability, said Greg Braca, head of U.S. corporate and specialty banking at TD Bank. “Banks are going to very much cherish their house accounts and core clients.”