HSBC Targets Revamp with 15% Staff Cuts, $7.3 Billion Charge

Daniel Fowler
February 18, 2020

Hong Kong: HSBC announced a radical overhaul on Tuesday, including plans to slash 35,000 jobs and slim operations in the United States and Europe, after profits slid by a third previous year.

Quinn, who took over from John Flint following a shock ouster last August, took home 1.98 million pounds.

"Parts of our business are not delivering acceptable returns", Quinn said in the bank's full-year earnings statement on Tuesday. "We are therefore outlining a revised plan to increase returns for investors".

HSBC's interim chief executive Noel Quinn said the bank would scale back its staff from 235,000 to around 200,000 over the next three years.

A refreshed strategy is a key plank to Chairman Mark Tucker's plans to transform HSBC as questions have mounted over its relatively poor returns given its exposure to numerous world's fastest-growing economies, in particular China where it has focused its investment.

HSBC shares in Hong Kong dropped as much as 3.2% after the announcement, marking the biggest intraday fall in six months.

The London-based lender is also targeting cost cuts by $4.5 billion as it faces challenges including Hong Kong protests and the coronavirus.

The bank now operates in more that 50 countries across North America, Europe, the Middle East and Asia. Seeking to simplify the group's structure, HSBC said it would combine its retail banking and wealth management business unit with global private banking operations to create one of the world's largest wealth management businesses.

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In the US, where returns have lagged the Asian operations for years, HSBC said it would cut the retail branch network by nearly one-third and move fixed-income trading to London, reducing operating costs by as much as 15%.

For its non-UK Europe sector, the bank said it would "reduce our sales and trading and equity research in Europe and transition our structured products capabilities from the UK to Asia". 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 bank, which has attempted similar changes before, has had little success so far and any further missteps could undermine confidence, analysts say.

HSBC Holdings on Tuesday revealed plans to cut almost 35,000 jobs and shrink its USA and European operations, as it flagged $7.2 billion in costs as it carries out its third major overhaul in a decade.

Tuesday's statement suggests further job losses are likely in the coming months.

"I think they will let him do the restructuring and if it is good, then he might become permanent", Jackson Wong, an asset management director at Amber Hill Capital, told AFP.

Adjusted profit before tax in Asia previous year was up six percent to United States dollars 18.6 billion.

HSBC said a 33 percent drop in annual profits past year compared to the $19.89 billion it made in 2018 was largely down to a $7.3 billion goodwill impairment related to its investment and commercial banking businesses in Europe.

But HSBC warned the outbreak of a new deadly coronavirus in China had lowered their expectations for growth in Asia in 2020. Efforts to sell HSBC's French retail business are progressing, people familiar with the matter have said.

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