HSBC Holdings embarked on its biggest overhaul in years after profit missed estimates, warning that it will trim underperforming operations in the face of slowing economic growth and geopolitical uncertainty, reported Bloomberg.
For acting Chief Executive Officer Noel Quinn, who took over in August 2019 following the ouster of John Flint, the review is his chance to put his stamp on the sprawling lender. Cuts at the investment bank have already begun.
The cutbacks underscore a reversal of the expansion made during Flint’s tenure when the bank said it would spend about $17 billion updating its technology platforms and expanding its business in mainland China.
Additionally, the writedowns will stem from winding down technology from businesses that will be closed, goodwill charges from parts of its European business and severance costs.
“Our previous plans are no longer sufficient to improve performance” in the US, continental Europe and British investment banking, given “the softer outlook for revenue growth,” said Quinn.
“We are therefore accelerating plans to remodel them, and move capital into higher growth and return opportunities,” added Quinn.
HSBC’s pretax profit fell 12 per cent to $5.3 billion for the third quarter. It dumped its target for return on tangible equity, a key measure of profitability, of more than 11 per cent in 2020. Similarly, retail banking and wealth management saw an 18 per cent drop to $1.69 billion.
Global banking and markets, which houses HSBC’s investment bank, posted a 30 per cent decline in pretax profit for the quarter to $1.24 billion and that may be bad news for bonuses. While the bank’s total costs rose year-on-year, HSBC said it had cut performance-related pay by $200 million.
Quinn, who’s signalled he wants the top job on a permanent basis, has been developing plans for a series of retrenchments. The bank may partially exit stock trading in some developed Western markets and will attempt to sell its French retail bank, a move that could remove as many as 8,000 staff from the payroll.