HSBC share price down, to slash 50 000 jobs in latest profitability push

HSBC Holdings Plc announced on Tuesday it will axe as many as 50 000 jobs as part of a global overhaul as it seeks to lean its structure and boost its sluggish performance.

About half of the headcount reduction will come from selling the businesses in Brazil and Turkey, the lender said, while the rest will result from cost reductions.

The banks UK operations will absorb 7 000 – 8 000 of the job cuts, or one in six UK employees, and will come mainly from branch closures and cuts at the headquarters in London’s Canary Wharf. Roughly a quarter of the workforce reduction, around 12 000 – 13 000, will come through automation and consolidation, although the bank also said new positions will be added in growing businesses and at its compliance division.

The restructuring will trim the lenders workforce from 295 000 in 2010 and 258 000 in December 2014 to 208 000 by 2017, when it aims to achieve annual cost savings of between $4.5 – $5 billion and raise its return on equity to above 10%, from 7.3% last year.

The largest part of the cost savings will come from an overhaul of the lenders IT systems, while cutting its global branches by 12% would generate real estate savings of around $135 million, HSBC said.

The bank added it will reduce its risk-weighted assets by $290 billion by 2017, including a $140-billion reduction, or a third, in its global banking and markets division, which will then account for less than a third of HSBCs balance sheet, from 43% last year.

The planned cuts come as Chief Executive Officer Stuart Gulliver goes for a second attempt to refocus the lender and shrink and streamline its operations since his appointment at the position in 2011. Similar cost-cutting measures were announced four years ago but yielded disappointing results. HSBC recently lowered a key profitability target, pushing some major investors to call for the replacement of Chairman Douglas Flint, while others called for the bank to be split.

Mr. Gulliver had previously underscored the need for a radical overhaul of the lenders Brazilian, Turkish, Mexican and US units. HSBC confirmed on Tuesday the planned sale of its operations in Brazil and Turkey and added it would retain a presence in the South American country to offer services to large corporate clients.

HSBC plans to improve returns and gain scale in Mexico, with Mr. Gulliver arguing that the Mexican unit was big enough to be viable and with potential to be turned around. The US was essential for serving big multinational companies and the bank will seek to improve returns and grow in key cities, it said.

At the same time, the lender is targeting growth in Asia by accelerating investments in its insurance operation, payments and cash management, and other businesses.

“The world is increasingly connected, with Asia expected to show high growth and become the centre of global trade over the next decade,” Mr. Gulliver said. “I am confident that our actions will allow us to capture expected future growth opportunities and deliver further value to shareholders.”

HSBC will also separate its British retail banking operation from any investment-banking activities by setting up a ring-fenced bank by 2019 to comply with regulations. The new bank, which will operate under a new brand, will account for two-thirds of UK revenues and will employ about 57%, or 26 000 people, of HSBCs UK workforce.

HSBC Holdings Plc traded 1% lower at GBX 613.30 per share at 09:51 GMT in London, marking a one-year drop of 2.39%. The lender is valued at 121.53 billion pounds.

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