HSBC Holdings said some of its largest clients have alreadyasked for their business to be routed through the bank's offices inmainland Europe and aren't waiting to see what Brexit deal the U.K.hammers out with the continent's trading bloc.

“A small number of our larger clients are asking us to book moreof their trade and foreign-exchange activity in their Frenchoperation through our Paris office than their U.K.” divisions, NoelQuinn, head of global commercial banking, said in an interview.Executives at multinational companies are “making plans to ensurethey can continue to trade irrespective of the outcome. They can'tafford to wait for a decision that may not emerge until two years'time.”

Global banks have started arranging for some British-basedoperations to move to new or expanded offices inside the EU afterBritish Prime Minister Theresa May triggered discussions to leavethe trading bloc. Privately, many executives at the world's biggestfirms say they're now assuming the result will be a “hard Brexit”— the loss of their right to sell servicesfreely around the region from the U.K. That means they have to putcontingency plans in place before the end of the two-yearnegotiation period.

Quinn, who's sat on the executive committee of HSBC, Europe'slargest bank, since December 2015, said some companies are alsoevaluating whether to “flip” their regional head offices toEuropean cities from Britain. This would require them to reclassifythe U.K. branch as a country office that would become a subsidiaryof the continental headquarters, he said. This may result in somesmall-scale job moves and lost taxation for the U.K. government ascompanies start reporting the purchase and distribution of serviceselsewhere.

“Larger companies that already have a pan-European presence aregoing to find it easier to invoke a plan B than the smaller ones,”Quinn said. “They're not losing faith in the U.K., but the realityis businesses or even individuals themselves will start makingtheir decisions before the answer emerges from the Brexitprocess.”

Hoarding Cash

HSBC CEO Stuart Gulliver has said as many as 1,000 of HSBC'straders and salespeople, who generate about 20% of the investmentbank's revenue, will relocate from London to Paris after PrimeMinister May confirmed the U.K. would leave the singlemarket. Some French staff have already asked to return home,according to people familiar with the matter. The bank decided tokeep its headquarters in London rather than move to Asia or Francein February 2016 after a year-long review.

Quinn also noted companies are maintaining higher levels of cashsince the June 23 vote to leave the EU.

“The quantity of cash they have in their bank accounts hasprogressively increased,” Quinn said in the interview. “The causeof that could be U.K. businesses trading really well post-Brexitbecause of the devaluation of sterling, or it could be thepreservation of cash given the uncertain economic horizon, or itcould be deferment or delay in investment activity.”

The commercial bank reported a 12% increase in adjusted pretaxprofit to $6.1 billion last year, which was the most among HSBC'sfour divisions and accounted for about a third of group's totalearnings, according to company filings. The U.K. contributed$1.8 billion of its pretax profit compared with $2.9 billion in theAsia region.

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