HSBC takes $7.3-billion charge in restructuring; to axe 35,000 jobs

HSBC Holdings Plc is taking about $7.3 billion of charges and exiting several business units in its most ambitious restructuring plan since the global financial crisis.

The London-headquartered bank is targeting cost cuts by $4.5 billion as it takes on a refreshed strategy to boost returns. The bank, which earns the bulk of its profits in Asia, is still searching for a permanent chief executive officer while interim boss Noel Quinn runs the lender.

“Parts of our business are not delivering acceptable returns,” Quinn said in a statement as part of its full-year earnings on Tuesday. “We are, therefore, outlining a revised plan to increase returns for investors.”

Cuts headcount

HSBC will shed some 35,000 jobs as part of a deep overhaul to focus on faster-growing markets in Asia and as it tries to cope with a slew of global uncertainties, from Brexit to the trade wars to the new coronavirus.

Quinn said on Tuesday the number of people employed by the bank would fall from 235,000 to 200,000 in the next three years. Some of the reductions would come from attrition as opposed to outright cuts.

The whopping headcount drop comes amid a downsizing in Europe. The restructure involves “consolidating” of some parts of the business and “reorganising the global functions and head office,” Quinn said.

Cutbacks at HSBC will extend into parts of its European and US investment banking businesses. In the US, assets linked to its trading operations will be nearly halved under the new plan. The lender will instead bolster its investment banking units in Asia and West Asia.

A refreshed strategy is a key plank to Chairman Mark Tucker’s plans to transform HSBC as questions have mounted over its relatively poor returns given its exposure to many of the worlds fastest-growing economies, in particular China where it has focussed its investment.

The bank warned the coronavirus outbreak and economic disruption in Hong Kong may impact its 2020 performance.

HSBCs adjusted pre-tax profits of $22.2 billion beat analysts forecasts, despite the multi-billion dollar charge taken against the cost of the restructuring. HSBC had been forecast to report an adjusted pre-tax profit of $21.8 billion, according to the company-compiled estimate of 18 analysts.

The company also suspended its share buyback program for 2020 and 2021.

Previous boss John Flint was ousted as CEO last year in part over Tucker’s concerns the executive lacked the ability to turnaround the lenders performance. Quinn, Tucker and chief financial officer Ewen Stevenson then began developing plans aimed at shrinking the banks cost base and focusing on higher returning markets, while curtailing exposures to regions and operations deemed subpar.

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