HSBC seeks revamp with 35 000 staff cuts in CEO's 'endgame'

HSBC’s building in Canary Wharf is seen behind a City of London sign outside Billingsgate Market in London

HSBC had been forecast to report an adjusted pretax profit of $21.8 billion, according to the company-compiled estimate of 18 analysts. "We are therefore outlining a revised plan to increase returns for investors, create the capacity for future investment, and build a platform for sustainable growth".

The London-based lender is targeting cost reductions of $4.5bn at underperforming units in the USA and Europe.

The move comes as HSBC plans to slash more than 100 billion USA dollars (£77 billion) from its risk-weighted assets. "We continue to monitor the situation closely".

"We also plan to simplify our complex organisational structure, including a reduction in Group and central costs".

"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.

"This arose from an update to long-term economic growth assumptions, which impacted a number of our businesses", HSBC's annual results statement said.

The bank said it is still looking for a full-time boss to replace Mr Quinn, and hopes to do so within the next six to 12 months.

HSBC expects to incur restructuring costs of around $6 billion and asset disposal costs of $1.2 billion - a total of $7.2 billion - through 2022, with the majority of restructuring costs to be incurred over the next two years.

While its Asia business has done well in recent years - fuelled primarily by China - Europe and the United States have disappointed.

HSBC's shares slid 2.2 percent in Hong Kong, outstripping losses in the broader market.

For its non-UK Europe sector, the bank said it would "reduce our sales and trading and equity research in Europe and transition our structured products capabilities from the UK to Asia". HSBC reported $12.6 billion in net profit in 2018.

In the US, where returns have lagged the Asian operations for years, HSBC said it would cut the retail branch network by nearly one-third and move fixed-income trading to London, reducing operating costs by as much as 15%. HSBC is also scaling bank its retail network by 30%. However, its London-based investment banking business is thought to be vulnerable. The remainders include two were "partly on track" - growth in its global network and simplification of the organization coupled with investment in future skills - the "off track" priority of turning around its USA business and achieving 6 percent return on tangible equity by 2020. HSBC also suspended share buybacks for 2020 and 2021, when most of the restructuring will occur.

Employment union Unite, which represents almost 20,000 HSBC staff mainly in Britain, said it has demanded urgent talks with the bank's management over the restructuring. The bank, which has attempted similar changes before, has had little success so far and any further missteps could undermine confidence, analysts say. It, too, was a pivot to Asia, with the bank planning to reduce assets allocated to less profitable markets such as Europe and the USA, and use the freed-up capital to bulk up in fast-growing Asian economies. In the meantime, it will accelerate investments in Asia, where the bank draws the bulk of its profit but is grappling with risks from the Hong Kong protests and China's coronavirus outbreak. In the U.S., HSBC plans to grow its international-client corporate banking business.



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