(Reuters) HSBC will shed almost 50,000 jobs and take an ax to its investment bank, cutting the assets of Europe’s biggest lender by a quarter in a bid to simplify and improve its sluggish performance.
The bank said on Tuesday (June 9) about half the staff cuts will come from the sale of businesses in Brazil and Turkey. The other half will come from cutting about 10 percent of the remaining 233,000 staff by consolidating IT and back office operations and closing branches. About 7,000-8,000 cuts are expected to be in Britain, or one in six UK staff.
The cuts will leave HSBC with about 208,000 full-time equivalent staff by 2017, down from 295,000 at the end of 2010 and 258,000 at the end of 2014, although the bank said it will be hiring in growth businesses and its compliance division.
The cuts are part of a second attempt by Chief Executive Stuart Gulliver to boost profits since he took the helm at the start of 2011. The previous effort was foiled by high compliance costs, fines, low interest rates and sluggish growth.
Some analysts also believe HSBC is under a lot of pressure from regulators, after it agreed to pay a record fine of $1.92 billion in 2012 to U.S. authorities for allowing itself to be used for laundering drug money flowing out of Mexico and other banking lapses, and two years later set aside $1.8 billion for misconduct settlements and compensation for customers, including a potential fine for rigging currency markets.
“The problem with HSBC is not that their operations are not sound. It’s just that they face a hostile regulatory environment. The authorities in the US and UK just want their pound of flesh, they want revenge, and for crimes that, actually, HSBC really did not contribute that much,” said CEO of GEO Securities Limited, Francis Lun.
After the announcement which came at noon (0400 GMT) Hong Kong time, HSBC shares rose slightly when markets resumed trading after a lunch break.
Lun said while the markets might welcome the cuts, in the long run the slash might not achieve much.
“Well, I think they (investors) are happy that at least they recognize their shortcomings, they’re doing something about it. They’re not sitting there, and do nothing. But I really doubt, personally, I don’t think they will achieve too much by cutting cost because cost already cut to the bone,” Lun said.
Investors had been calling for more radical cuts at the investment bank, which Gulliver ran for five years but where returns have suffered in tough market conditions.
The bank said it was also targeting growth in Asia by expanding its insurance business and its presence in China’s Pearl River Delta region.
The bank also set out 11 criteria it will use to evaluate whether to move its headquarters from London to Asia, likely Hong Kong. They include factors such as economic growth, the tax system, government support for the growth of the banking system, long-term stability and an ability to attract good staff.
HSBC said it would complete the review of the possible move by the end of the year.