HSBC is cutting 35,000 jobs over three years in an extreme overhaul of its operations as it aims to shed a colossal $100 billion in assets, shrink its investment bank and revamp its US and European businesses.
“The group’s 2019 performance was resilient, however parts of our business are not delivering acceptable returns,” HSBC’s group CEO Noel Quinn said in a statement. The bank’s profits for 2019 fell by a third (33%) at $13.35 billion, which it mainly put down to $7.3 billion in write-offs across its European investment and commercial banking operations.
The profit plunge will now push the bank to target a cost cutting exercise of $4.45 billion over the next two years.
HSBC is embarking on one of the largest blue chip overhauls since the financial crisis. It will merge its private banking and wealth businesses, get rid of European stock trading and cut its US retail branches.
HSBC told Reuters that the restructuring will result in its current 235,000 headcount going down to roughly 200,000, losing 15% of its workforce and see one in seven jobs lost globally. Reports from January only anticipated a workforce decrease of 10,000, so the more than three times the size 35,000 comes as a shock to the industry.
Spread across 64 countries, the bank has not revealed which will be the most affected by the cuts, but has said they will mainly be in its European and US investment banking divisions.
In a bid to improve its returns by 2020, HSBC highlights the need to focus on where the bulk of its revenues are coming from. Those are its retail banking and wealth management (RBWM) arm which serves 38 million customers worldwide, and all its businesses in Asia.
“We intend to reduce capital and costs in our underperforming businesses to enable continued investment in businesses with stronger returns and growth prospects,” Quinn said.
Headquartered in Hong Kong, the bank has said the coronarivirus outbreak may affect its performance in these more lucrative areas of its business this year.
“Depending on how the situation develops, there is the potential for any associated economic slowdown to impact our expected credit losses in Hong Kong and mainland China,” said Quinn on the virus.
“Longer term, it is also possible that we may see revenue reductions from lower lending and transaction volumes, and further credit losses stemming from disruption to customer supply chains. We continue to monitor the situation closely.”
The bank also had to suspend services at 19 ATM locations in Hong Kong last month after two of its branches were targeted by anti-government protesters.
Analysing the big operational changes made by the bank, former dean of the London Institute of Banking & Finance Peter Hahn tells the BBC: “The reality is that the biggest investment market in the world is the US, and if you’re not big in the US in investment banking it’s pretty tough to succeed in that business – and they’re [HSBC] not.”
Quinn is currently initiating these overhauls as interim CEO, but he is interviewing for the permanent role of CEO. The bank said in August that it would be appointing the new role within 6-12 months.