HSBC to cut 35,000 jobs across the globe

Following the publishing of the Bank’s results, HSBC is said to be intent on cutting 35,000 jobs globally to increase returns.

HSBC’s 2019 profit has been reported as down 33% on 2015 figures, at USD13.3 billion. As a result, the Bank has said in a statement that it intends to reduce capital and costs in underperforming businesses to enable continued investment in businesses with stronger returns and growth prospects, including in Retail Banking and Wealth Management (RBWM) and in all the Bank’s businesses in Asia.

HSBC has also revealed plans to simplify its “complex organisational structure”, meaning a reduction in Group and central costs, at the cost of job positions within the firm.

The Bank has targeted a gross reduction of over USD100 billion in Risk-weighted assets (RWA) by 2022, a reduced adjusted cost base of USD31 billion or below in 2022 underpinned by a cost reduction plan of USD4.5 billion, and a Return on Tangible Equity (RoTE) of in the range of 10-12% in that year.

HSBC has also stated that it intends to sustain the dividend and maintain a Common equity tier 1 (CET1) ratio in the range of 14% to 15%, with ambitions to be at the top end of this range by the end of 2021.

Addressing the European Business, HSBC has said that it plans to reduce its RWAs by around 35% by the end of 2022, placing the focus on clients that value international banking capabilities, reducing capital deployed to the Bank’s Rates businesses, and exiting capital and leverage intensive product lines.

In the UK, HSBC intends to focus UK investment banking activities on supporting UK mid-market clients and international corporate clients through the Bank’s London hub.

The Bank is also planning to transition its structured products capabilities from the UK to Asia, and reduce its sales and trading and equity research in Europe.

In the US, HSBC aims to reposition its business there as an international client-focused corporate bank, with a targeted retail offering. As part of this, the Bank has revealed plans to consolidate Fixed Income activities across the US and UK businesses, and hopes to reduce the RWAs of its US Global Markets business by around 45%, allowing for reinvestment into Commercial banking, Retail banking and Wealth Management.

The US branch network is also in the cross-heirs, with a plan to consolidate middle- and back-office activities, streamline functions and reduce the branch network by approximately 30%.

When question on the UK branch network, a region in which HSBC employs around 40,000 people, Quinn stated that any action is currently “under review.”

Regarding Global Banking and Markets, HSBC has stated that it aims to support corporate and institutional clients with global operations. The Bank has stated that it plans to increase investment in Asia and the Middle East, and that it will continue to strengthen its transaction banking and financing capabilities.

Investment banking capabilities are at the forefront, with plans to strengthen capabilities in Asia and the Middle East, while maintaining a global investment banking hub in London. The Bank also has plans to build leading emerging markets and financing capabilities in Global Markets, and enhance its institutional clients business.

In pursuit of group-wide simplification, HSBC has stated that it plans to implement a number of changes to create a simpler organisational structure.

These changes will include the consolidation of the back and middle office to a single model for Commercial and Global Banking; consolidating Retail Banking & Wealth Management and Global Private Banking into a new Wealth and Personal Banking (‘WPB’) division; reducing geographic reports from seven to four at Group Executive level; and reorganising the global functions and head office to match the new structure.

HSBC has predicted that it will exhaust around USD6 billion in restructuring costs, and around USD1.2 billion in asset disposal costs between 2020-2022, with the majority of these being incurred between 2020 and 2021.

Noel Quinn, Interim Chief Executive, HSBC, said “We would expect our headcount to decrease from the current level of 235,000 to be closer to 200,000 in 2022,” according to an article by the guardian, when addressing the reported intent to reduce costs by USD4.5 billion.

“This represents one of the deepest restructuring and simplification programmes in our history,” said Quinn.

Ewen Stevenson, Chief Financial Officer, HSBC, went on to describe that there would be “meaningful job cuts here in the UK.”

HSBC has also reduced its expectations for economic growth in Asia, where the majority of its focus seems to be shifting, due to the potential impact of the Coronavirus, according to Mark Tucker, Chairman, HSBC.

According to a Reuters report, the Coronavirus could result in a USD600 million loss for HSBC, if the bank is forced to take additional provisions against loan losses, should the impact of the virus extend into the latter half of 2020.

 “There will be revenue impacts which will become progressively more acute if the coronavirus was to continue beyond the next month to six weeks,” said Stevenson.