HSBC said Tuesday it will prune its head count by up to 50,000, as Europe’s biggest bank by assets targets annual cost savings of up to $5 billion in a bid to “significantly reshape” its business. The London-based lender said it would shift capital away from low return activities and redeploy it in the higher growth markets of Asia.
HSBC to slice investment banking
While unveiling the job cutting strategy, Stuart Gulliver, chief executive, said 7,000 to 8,000 of the job cuts will fall in the bank’s U.K. operations, mostly as a result of “natural attrition.”
The London-based lender indicated that the sale of its Turkey and Brazil operations will trim its head count by about 25,000 and that a further 22,000 to 25,000 jobs would be chopped by 2017 through cost reductions across the group. Of those jobs, the bank aims to trim 12,000 to 13,000 jobs through automation of operations.
HSBC’s decision to shrink its workforce mirrors plans announced recently by many of its rivals, including Barclays, Royal Bank of Scotland, Credit Suisse and Deutsche Bank. Last week, ValueWalk reported that HSBC joined JPMorgan Chase in eliminating thousands of jobs. We had reported that the British bank is preparing to trim its global workforce as part of its initiative to reassure shareholders that it is focused on reducing costs after sustaining a series of scandals that damaged its reputation.
HSBC plans to shed many of its investment banking assets and retreat from under-performing markets such as Brazil and Turkey. Despite the huge cuts, investor reactions to the strategic plan was muted, with some disappointed that the bank didn’t present an even more radical plan. HSBC shares fell 1% in London trading.
HSBC aims to trim RWA of about $290 billion
While outlining its job reduction strategy, the British bank also indicated that it will target an overall reduction of its risk-weighted assets of at least a quarter or about $290 billion, and trim its branch network by around 12%. The bank said it wanted to ramp up Asia’s share of its risk-weighted assets from 33% to over 40%.
The sale of the Brazil and Turkish units will cut $110 billion in risk-weighted assets. There will be a $140 billion reduction in HSBC’s global banking and markets unit, a $30 billion cut in the commercial banking operation and a $40 billion reduction from continuing the runoff of the bank’s U.S. consumer and mortgage loan portfolio.
Interestingly, it is the second time in four years that HSBC has attempted to shrunk and attempted to streamline its sprawling global operations. Mr. Gulliver outlined a similar cost-cutting drive in 2011, but the results were disappointing. Since taking the helm in 2011, he has cut the workforce to 257,000 from 296,000.
Focusing on the bank’s much-touted relocation move, Gulliver said that if the bank relocated its headquarters, this would only result in around 250 job losses, implying that it would not be a “major employment issue.” He stressed that no decisions had been made yet and that the issue had not even been discussed by the board.
However, he set out the criteria for the bank’s review and indicated that HSBC will look at 11 factors in different countries, including the financial impact of a move, the size and outlook of the local economy, transparency, and the legal system.