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35,000 jobs to go

HSBC poised for sharp cuts after profits slump 33%


Cuts are on the way at Europe’s biggest bank but branches will escape (pic: Terry Murden)

HSBC is poised for massive cuts in jobs in a restructuring of its operations in Europe and the US after announcing a sharp slump in profits.

Europe’s largest bank is targeting 35,000 job cuts to achieve $4.5bn of cost cuts by 2022 amid slowing growth and globally low interest rates.

About $100bn (£77bn) in assets will be offloaded and the investment branch slashed as it seeks to become leaner and more competitive. The UK branch network is unlikely to be significantly impacted.

Profits for 2019 fell by 33% to £10.3 billion, mainly because of its investment and commercial banking operations in Europe.

The bank, which makes the bulk of its revenue in Asia, reported annual profit before tax of $13.35 billion (£10.3bn) for 2019 against $19.89bn last tiume.

The drop in profits was due to $7.3bn in write-offs related to its global banking and markets and commercial banking business units in Europe. Asia accounts for around half of HSBC’s revenue and 90% of profits.

HSBC said it would combine its retail banking and wealth management business unit with global private banking to create one of the world’s largest wealth management businesses.

The figures were unveiled by Noel Quinn who was appointed interim chief executive last year following the ousting of John Flint.

“The totality of this programme is that our headcount is likely to go from 235,000 to closer to 200,000 over the next three years,” he said.

Mr Quinn is working on the cost-cutting plan with Ewen Stevenson, chief financial officer, who reduced costs substantially when he held the same role at Royal Bank of Scotland.

HSBC reiterated that it expects to make a permanent CEO appointment within the next six to 12 months.

Market reaction

Ed Monk, associate director at Fidelity Personal Investing’s share dealing service, said: “Not much has gone right at HSBC in the past year. The bank was already struggling with a difficult restructure, job losses and political unrest in its hometown Hong Kong market when Coronavirus struck.

“HSBC results today confirm the potential for painful credit right-downs as a result of the outbreak, as well as tougher economic conditions in the region as travel and activity is restricted – a massive $7.3bn goodwill impairment that has contributed to profit before tax falling 33%.

“The upshot is that HSBC will now miss targets it set two years ago on return-on-tangible-equity, which fell in the past year to 8.4% against a target of 11%. HSBC will now seek to hit a new target between 10% and 12% by 2022. With lots of difficult restructuring still to do and a new permanent chief executive still to be confirmed, shareholders will need to show patience.”

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