HSBC to Slash 35,000 Jobs as Profits Plummet
Hongkong and Shanghai Bank Corporation (HSBC) Holdings has embarked on its third major overhaul in a decade while it continues to hunt for a permanent chief executive. The bank’s interim chief executive Noel Quinn announced a series of sweeping measures on Tuesday. However, the board’s decision to delay the confirmation of a permanent chief executive has left investors questioning the restructuring.
While the London-headquartered bank has reaped in billions of dollars of investment in Asia over the last few years, primarily from China, sluggish performance in Europe and the United States has stained its positive track records. HSBC has announced that it plans to reduce its global headcount by roughly 15 per cent to 200,000 over the next three years after the bank’s profits plummeted significantly.
Specifically, HSBC recorded a 32.9 per cent decline in pre-tax profit for 2019 to $13.35 billion, a huge discrepancy from Refinitiv’s forecast of $19.83 billion. More notably, its performance was affected by one-time write-offs associated with its commercial and investment banking units in Europe. As such, the reduction in manpower is expected to help to cut £3.5bn in costs by 2022.
Additionally, the bank will group itself into four distinct geographic regions – Asia, United States, United Kingdom and the rest of the world. In the United States, where HSBC has failed to perform for many years, the bank aims to close approximately one-third of its 224 branches and shift its target towards more affluent retail consumers. Even as London remains a hub for investment banking, HSBC’s global banking team will now place a stronger emphasis on the Middle East and Asia, where it already makes most of its profits.
However, Asia has been faced with a series of unfortunate events such as the months of political unrests in Hong Kong and the ongoing coronavirus saga. Consequently. the impact on revenue is expected to become more significant should the epidemic persists beyond the next six weeks. Besides, the bank announced that it would maintain its dividend, but added that it would make cuts to its sales & trading and equity research units in Europe.
In his attempt to save costs, Mr Quinn would also consolidate divisions, with global private banking, wealth management and retail banking now coming under one umbrella. The broader strategy overhaul comes as HSBC is faced with an increasing list of negative headwinds including slowing economic growth in major markets in which it participates in, falling interest rates which makes lending less profitable, Britain’s protracted withdrawal from the European Union and the outbreak of the deadly coronavirus.
Even as HSBC chairman Mark Tucker revealed that the board has embarked on a very treacherous process in the search for its new CEO, analysts have expressed concerns that Mr Quinn is spearheading the bank’s restructuring. HSBC expects to announce a permanent CEO within the upcoming six to twelve months it had previously outlined in August.
By Caroline Wong
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