HSBC to shed assets worth $100b, lay off 35,000 people over three years

People walk past a major branch of HSBC at the financial Central district in Hong Kong, China February 21, 2017. REUTERS/Bobby Yip

HSBC Holdings said on Tuesday it would shed $100 billion in assets, slashing the size of its investment bank and revamping its U.S. and European businesses – in a drastic overhaul that will mean 35,000 jobs cut over three years.

The bank, which has long underperformed rivals, is seeking to become leaner and more competitive as it tries to grapple with a swathe of challenges: slowing growth in its major markets, the coronavirus epidemic, Britain’s withdrawal from the European Union as well as lower central bank interest rates.

“The totality of this program is that our headcount is likely to go from 235,000 to closer to 200,000 over the next three years,” Noel Quinn, interim chief executive, told Reuters. Some of that will be managed through natural attrition as people leave the bank, he said.

In announcing the restructuring, Quinn is auditioning for the permanent role of CEO, which the bank said in August would be announced within six to 12 months.

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.

That was due to $7.3 billion in write-offs linked to its global banking and markets and commercial banking business units in Europe.

In the United States, where the bank has underperformed for years, HSBC said it needed to improve returns and would close around a third of its 224 branches and target only international and wealthier clients.

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.

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.

Although it will reinvest some of the money gained from downsizing, it plans to have a reduced adjusted cost base of $31 billion or below in 2022, underpinned by a new cost reduction plan of $4.5 billion.

The return of tangible equity (RoTE), a key profitability measure, is expected to be in the range of 10% to 12% in 2022. The bank reported a RoTE of 8.4% for last year, down from 8.6% in 2018.

HSBC said the ongoing coronavirus epidemic had significantly impacted its staff and customers, and the outbreak could in the long run reduce its revenue and cause bad loans to rise as supply chains are disrupted.

“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,” Quinn said.

The number of new coronavirus infections in mainland China fell below 2,000 on Tuesday for the first time since January, although global experts said it is still too early to say the outbreak is being contained.

Reuters

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.