HSBC Holdings is set to slash about 35 000 of its workforce, and is taking $7.3bn of charges in its most dramatic overhaul under Chairperson Mark Tucker.
The London-based lender is targeting cost reductions of $4.5bn at underperforming units in the US and Europe. Instead, it will accelerate investments in Asia, from where the bank draws the bulk of its profits even as risks from the Hong Kong protests and the coronavirus outbreak persist. The board is also deciding whether the sweeping overhaul announced by interim boss Noel Quinn is enough to secure him the top job permanently.
"Parts of our business are not delivering acceptable returns," Quinn said in a statement as part of its full-year earnings on Tuesday. "We are therefore outlining a revised plan to increase returns for investors."
Quinn, who is also exiting several business lines, said in an interview with Bloomberg that staff numbers could drop by 15% within the next three years.
"We are looking at an endgame of closer to 200 000," he said.
Cutbacks at HSBC will extend into parts of its European and US investment banking businesses, particularly in fixed income. In the US, assets linked to its trading operations will be nearly halved under the new plan. HSBC is also scaling bank its retail network by 30%.
HSBC to cut up to 10 000 jobs to slash costs, FT reports
The lender will instead bolster its investment banking units in Asia and the Middle East.
"We are intending to exit a lot of domestically-focused customers in Europe and the US on the global banking side," Chief Financial Officer Ewen Stevenson said in a Bloomberg Television interview. Management will be "surgical and ruthless" in targeting parts of the business where returns aren't acceptable, he said.
A refreshed strategy is a key plank to chairperson Tucker's plans to transform HSBC as questions have mounted over its relatively poor returns given its exposure to many of the world's fastest-growing economies, in particular China where it has focused its investment.
Reacting to the HSBC restructuring plan on Bloomberg Television, Alan Higgins, chief investment officer of Coutts & Co, said the fresh strategy made sense, but that it was "on the conservative side."
The bank warned the coronavirus outbreak and economic disruption in Hong Kong may impact its 2020 performance. HSBC shares dropped as much as 3.2% in trading after it suspended share buybacks for 2020 and 2021, when most of the restructuring will occur.
HSBC's adjusted pretax profits of $22.2bn beat analysts' forecasts, despite the multi-billion dollar charge taken against the cost of the restructuring. HSBC had been forecast to report an adjusted pretax profit of $21.8bn, according to analysts.
The company also suspended its share buyback program for 2020 and 2021.
Highlights of the cuts include:
Gross asset reduction of more than $100bn by the end of 2022Lowered cost base of $31bn or less by 2022Combine consumer banking and private banking into a single wealth platformWill merge global banking and commercial banking middle and back officesReducing geographic reporting lines from seven to four