HSBC Plans 14,000 More Job Cuts

HSBC plans to cut 14,000 more jobsBy Lawrence White and Steve Slater

HONG KONG/LONDON -- HSBC will redouble its cost-cutting efforts, including axing up to 14,000 more jobs, but Europe's largest bank was forced to soften a key performance target in the face of muted revenue. London-headquartered HSBC is seeking up to $3 billion in additional annual savings by 2016, on top of $4 billion already achieved, but sluggish growth outside Asia, particularly in Europe, means its target to get costs below 52 percent of revenue has been eased. The new goal is to keep the ratio near 55 percent, the level it was at in 2010 -- the year before Chief Executive Stuart Gulliver took over and kickstarted a radical retrenchment at a bank that was criticised in the past for "planting flags" around the world. "We're clearly hitting on the costs, but we're missing on the cost efficiency ratio because of revenue, which is hard for us to control," Gulliver told reporters. "Top line growth is clearly a challenge."

He added: "We need to have a cost-efficiency target that's realistic, so we're saying take a look at our peer group. They are all in the high 50s or low 60s, whether it's JPMorgan, Citi, Standard Chartered or Barclays." HSBC had a cost efficiency ratio of 63 percent last year, which improved to 53 percent in the first quarter. Banks do not release comparable data, but last year JPMorgan's expenses were 67 percent of revenue, at Citi it was 65 percent, Barclays had an adjusted cost/income ratio of 64 percent and Standard Chartered's normalized cost/income ratio was 54 percent.

Gulliver, former head of HSBC's investment bank, already has cut 46,000 jobs and sold or closed 52 businesses, including a minority stake in Chinese insurer Ping An and its U.S credit cards.

More: HSBC, Facing $2 Billion Settlement, Mulls 5,000 More Layoffs

Such deals have reduced its risk-weighted assets by $95 billion and produced gains totalling about $8 billion.

"We're not even halfway through unlocking the value in HSBC. The strategy is not changing, it is working," Gulliver told analysts.

Gulliver said the runoff of its U.S. loan book and legacy investment bank assets would make it difficult for HSBC to meet its goal of a return on equity of over 12 percent this year, but he stuck with that target for the future. He also hardened his goal on capital, aiming for a core capital ratio of more than 10 percent.

HSBC said it would "progressively grow" its dividends and would introduce a share buyback next year, if investors and regulators give their approval. That would make it one of the first European banks to buy back shares since the financial crisis. Its aim would be to offset the impact of its scrip or share dividend, which is popular with Hong Kong retail investors but causes dilution for shareholders as more than $2 billion of shares are issued each year.

"They are doing a good job on costs, capital looks good, balance sheet looks good, but the big issue is when does the revenue growth come through?" said Chris Wheeler, analyst with Mediobanca. "The big debate will rage about revenue growth."

Shares in HSBC, the world's third-largest by stock market value after China's ICBC and China Construction Bank, were up 0.9 percent at 753 pence by 1230 GMT against a 1.6 percent rise in the European sector.

The stock has risen around 13 percent since the start of 2011, compared with a 9 percent drop in the sector.

More: JPMorgan Chase To Cut 17,000 Jobs Over The Next 2 Years

In the face of weak demand in Europe, HSBC plans to increase revenue by focusing on high-return markets in Asia, where it generated around two-thirds of its profit in the first quarter. It has scaled back its annual revenue growth targets for its wealth management division by $1 billion to an additional $3 billion, blaming tougher regulations for crimping its ability to sell products in countries such as Britain.

Gulliver said the bank was unlikely to spend extra cash on any significant acquisition. He said the bank could also sell its 8 percent stake in Bank of Shanghai, which he said was likely to be worth between $500 million and $600 million. Its 19 percent stake in Bank of Communications remain core and was it key China associate, he said.

The bank said this week it could sell its private banking business in Monaco, but its new cost-cutting campaign is set to focus less on disposals and outright closures and more on streamlining processes. The bank said employee numbers could fall to between 240,000 and 250,000 by 2016, from 254,000 when current disposals and announced cuts take effect. It did not say where the additional cuts would be made, saying only they would be "spread quite thinly around the world".

With the banking industry assailed by a new world order of tougher regulation and weak investment returns, HSBC said it needed to take its cue from other sectors that faced major challenges including telecoms and car making. In a 83-page presentation for investors, HSBC said there were still significant opportunities to cut costs by simplifying operations, flagging a recent contract it had signed with one vendor to manage its facilities, replacing 1,100 different suppliers it had previously.

HSBC to Cut Up to $3 Billion




Don't Miss: Companies Hiring Now


Related Stories

Add a Comment

*0 / 3000 Character Maximum

215 Comments

Filter by:
dnkdltn

How much is that HSBC building costing per year?? Big business; big buildings.

May 21 2013 at 11:48 AM Report abuse rate up rate down Reply
geoffandmarie418

I'M Shocked, I'm Shocked, a company laying off people to improve their bottom line, WOW!!

May 20 2013 at 2:04 PM Report abuse rate up rate down Reply
Paula

And the vicious cycle continues... for every employee layoff, there's someone Not paying Income Tax, Not buying Goods/Services, Not going on vacation, Not using a Dry Cleaners, Not buying New Clothing, or new Furniture! It's only just a matter of time when the "Plurge" will begin, the Have Not's will run amok and begin robbing people at gunpoint (or knifepoint) - we're already killing for iPhones/iPads snatching devices out of people's hands while they're having a conversation - by those who can't afford to buy one because they can't Get A J.O.B.!
If I could afford to move to Canada or China or India even - at least their economies are growing while ours is shrinking... Read my eBook Red-White-Poor.com how Outsouring and Economics have Racially Divided America - Digital Download available on Amazon.com.

May 20 2013 at 1:29 PM Report abuse rate up rate down Reply
stevensonjll

why should they wire all that weed money to iran, instead of pissing on the employees.

May 17 2013 at 8:46 PM Report abuse rate up rate down Reply
Ed.

WITH THE ECONOMY AT A STAGGERING LOW PEOPLE ARE BEING LAID OFF THEIR JOB...AND WHAT IS STRANGE ABOUT THIS IS THAT THE THE MAJOTIETY PEOPLE HEAR THEIR STORY....;AND REALLY NO ONE CARES....BECAUSE WE ARE TOO MUCH INTERESTED IN OURSELVES!

May 17 2013 at 11:21 AM Report abuse rate up rate down Reply
DOC

Gotta fund that CEO bonus somehow !

Doc

May 17 2013 at 11:14 AM Report abuse rate up rate down Reply
misspastel

I really can't contribute to this conversation, but what I can do is cut monies spent. For instance, in Florida, prisions are privately owned. They get paid for each inmate; or we pay taxes for these.

I feel if everything is in order, and the inmate is proven guilty, give them the electric chair and then
the injection. I am talking about serial killers or of killers of children....Just an injection will not hurt the
prision mate....They go to sleep. Does the victims of these killers find relief? Absolutely not. Kill them right away. A life sentence? We are paying for them. I still feel there may be hope for youngsters.

May 17 2013 at 10:59 AM Report abuse rate up rate down Reply
TINKDAY

This is the bank that was caught laundering hundreds of millions, or more in drug cartel money, and received nothing more than a hand slap if that. Wonder how much of that money was used to kill people, buy politicans etc. Now their profits are down, interesting, tough when you have to make money the old way, honestly.

May 17 2013 at 10:13 AM Report abuse +1 rate up rate down Reply
legalcld

Those part time jobs at all the fast food restaurants should fill up fast now$$

May 17 2013 at 9:44 AM Report abuse -1 rate up rate down Reply
1 reply to legalcld's comment
Ed.

BUR THEY'RE NOT HIRING!

May 17 2013 at 11:22 AM Report abuse rate up rate down Reply
testarope

This is the same bank that was caught laundering money for: Al Quaeda, North Korea, Iran, and Mexican drug cartels, but was given a slap on the wrist. They were fined about four weeks of profit. I worked for these scum as a temp for almost two years, and can say without exaggeration that they (The people running the bank) are the worst people on earth. They made billions laundering money for enemies of democracy, yet refused to pay temps for any holiday, including Christmas. They are as bad as any sociopath, because they are incapable of seeing human beings before profit, which is why a multi-millionaire can smugly talk of profit and cost cutting when he is referring to 14,000 people who will not have an income. There is a special place in hell for those who have plenty but want more at the expense of others.

May 17 2013 at 8:27 AM Report abuse +3 rate up rate down Reply
1 reply to testarope's comment
axman922

thats cause the presidents and ceo's just cant live on meger pay they need millions so they can have all the goodys a bank officer should have ! this statement came out of a bank presidents mouth stating he could live on low wages ! they almost bring down the entire world and they dont feel they should give anything back > no conscience > this is purfect description of a psycopath . Peace

May 17 2013 at 11:25 AM Report abuse rate up rate down Reply

Search Articles

Top Companies Hiring

Week of Sep 28 - Oct 5
View All

Featured Writers

Meet the team

Picks From the Web