HSBC to slash 35,000 jobs, shed assets worth $100 billion

Marco Green
February 18, 2020

The Asia-focused lender has been trying to lower costs as it faces a multitude of uncertainties caused by the grinding US-China trade war, Britain's departure from the European Union and now the deadly new coronavirus in China.

HSBC Holdings said on Tuesday it would shed $100 billion in assets, slashing the size of its investment bank and revamping its USA and European businesses - in a drastic overhaul that will mean 35,000 jobs cut over three years. It, too, was a pivot to Asia, with the bank planning to reduce assets allocated to less profitable markets such as Europe and the US, and use the freed-up capital to bulk up in fast-growing Asian economies.

The lender will instead bolster its investment banking units in Asia and the Middle East. Management will be "surgical and ruthless" in targeting parts of the business where returns aren't acceptable, he said.

"Parts of our business are not delivering acceptable returns", interim Chief Executive Noel Quinn, who aspires to run the bank full time, said in a statement. "We are therefore outlining a revised plan to increase returns for investors", Quinn said.

HSBC's shares slid 2.2% in Hong Kong, outstripping losses in the broader market.

The restructuring plans are the most ambitious since 2012 when HSBC was caught up in a Mexican money laundering scandal.

The U.K. -based bank, which already generates most of its profit from operations in Asia, aims to cut gross risk-weighted assets by $100 billion by the end of 2022.

The division, which includes HSBC's investment bank, has continued to do less well than its commercial and retail banking businesses.

Much of the cutbacks will be in the European and U.S. investment banking sectors, while units in more profitable Asia and the Middle East would be bolstered.

In the USA, the bank said it planned to reduce its branch network by around 30%, consolidate back and middle office activities and lower operating expenses by 10-15%.

The bank will also reduce its sales and research coverage in European cash equities with a focus on supporting equity capital market transactions, it said, confirming a Reuters report last month regarding pullback from the trading business. In the USA, assets linked to its trading operations will be almost halved under the new plan.

The bank said in its statement that the process for appointing a permanent chief executive is ongoing, and that it expects to make a decision within the next six to 12 months.

The bank said it planned to achieve a reduced adjusted cost base of US$31 billion or below in 2022, underpinned by a new cost reduction plan of US$4.5 billion, and return of tangible equity in the range of 10 per cent to 12 per cent in the same period. Europe's biggest bank by assets, which makes the bulk of its revenue in Asia, said profit before tax tumbled by a third to $13.35 billion in 2019, far below the average estimate of $20.03 billion from brokerages.

It also warned of "significant charges" in the fourth quarter - including those related to restructuring - if the backdrop worsened further.

"But they are still searching to see whether someone can grow the business not just cut costs".

Adjusted profit before tax in Asia a year ago was up six percent to $18.6 billion.

HSBC's adjusted pretax profits of $22.2 billion beat analysts' forecasts, despite the multi-billion dollar charge taken against the cost of the restructuring.

Even in Hong Kong, which was battered by months of seething pro-democracy protests a year ago, the banking giant posted a five percent increase in adjusted pre-tax profit to $12.1 billion. HSBC reported a RoTE of 8.4% for past year, down from 8.6% in 2018.

Other reports by Click Lancashire

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