HSBC Holdings is set to undertake a massive restructuring of its business.
The company announced that it would reduce its assets by about $100 billion while also reduce the size of its investment bank. It also announced plans for revamping of its business in the United States and Europe. This business restructuring is also expected to result in about 35,000 jobs losses in the company over a period of three years.
The aim of the huge restructuring plan is to make the bank more competitive by becoming leaner. The bank has been underperforming compared to its rivals for quite some time now. It has been unable to come to grips with multifold challenges which include a slowdown of its growth in its primary markets, the recent outbreak of coronavirus in China, the exit of te United Kingdom from the European Union as well as very low rates of interest as set by various central banks across the markets where it operates.
“The totality of this program is that our headcount is likely to go from 235,000 to closer to 200,000 over the next three years,” Noel Quinn, interim chief executive, said in an interview with the news agency Reuters. He said that a part of the job cuts will be handled through natural case of attrition as people leave the bank.
Analysts see this announcement of restructuring and turnaround measures by Quinn an effort on his part to secure his job as CEO of the company on a permanent basis as the company had said in August last year that it would decide on a permanent CEO role within six to twelve months.
For 2019, the bank’s profit before tax tumbled by a third to $13.35 billion which was well below of analysts’ expectations of $20.03 billion from brokerages. HSBC is the largest European bank in terms of the total value of assets it holds and it generates most of its revenues from its Asian business.
The company noted that the fall in the profit before tax was because of a one-time charge of $7.3 billion in write-offs that were related to its global banking as well as its markets and commercial banking business in Europe.
About one third of its 224 branches would be closed by the bank in the United States – a market where the company has failed to do well for years now. This measure, along with its strategy of targeting only international and wealthier clients will help the company to improve returns, the bank said.
The retail banking and wealth management business unit of the bank would be merged with its global private banking operations, HSBC said, with the aim of simplifying the group’s structure. This internal merger would also create one of the largest wealth management businesses of the world in terms of assets.
Further, the bank said that with a focus on supporting equity capital market transactions, the sales and research coverage in European cash equities business will also be reduced.
(Adapted from Reuters.com)