HSBC unveils an overhaul of its global business as profits drop 33%

18 Février, 2020, 11:20 | Auteur: Auguste Feret
  • FILE HSBC Building Markham Liberty Square Markham

A HSBC bank logo is seen on a sign outside a branch of the bank in London on 22 October 2015.

HSBC Holdings said on Tuesday it would shed $100 billion in assets, slashing the size of its investment bank and revamping its United States and European businesses - in a drastic overhaul that will mean 35,000 jobs cut over three years.

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

While the bank counts on Asia for more than 95% of its profits, about 45% of its capital still backs assets deployed in the U.S., Europe and the U.K. Asia accounts for just over 40% of the risk-weighted assets. Management will be "surgical and ruthless" in targeting parts of the business where returns aren't acceptable, he said.

The bank's headcount is expected to drop from 235,000 to around 200,000 over the next three years, a company spokesperson confirmed. "We are therefore outlining a revised plan to increase returns for investors", Quinn said.

HSBC shares had their biggest drop in six months in Hong Kong and dropped as much as 3.2% in trading.

A refreshed strategy is a key plank to chairperson Tucker's plans to transform HSBC as questions have mounted over its relatively poor returns given its exposure to numerous world's fastest-growing economies, in particular China where it has focused its investment.

HSBC hopes to have greater success this time by quickly shrinking businesses in the USA and Europe, or selling off units such as the company's French bank that is up for sale. However, its London-based investment banking business is thought to be vulnerable.

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

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". Although it will reinvest some of the money gained from downsizing, it plans to have a reduced adjusted cost base of $31 billion or below in 2022, underpinned by a new cost reduction plan of $4.5 billion. The pre-tax profit drop - it pulled in $13.3 billion previous year, compared to almost $20 billion in 2018 - was due in large part to a $7.3 billion write-off related to its global banking and commercial banking teams in Europe.

It also warned of "significant charges" in the fourth quarter - including those related to restructuring - if the backdrop worsened further.

"I think they will let him do the restructuring and if it is good, then he might become permanent", Jackson Wong, an asset management director at Amber Hill Capital, told AFP. The bank reported an annual £10.3billion of profits before tax.

The bank also issued a warning over the coronavirus outbreak in Asia, which makes up the bulk of its profits, saying it could have an impact on its performance in 2020.

Even in Hong Kong, which was battered by months of seething pro-democracy protests previous year, the banking giant posted a five percent increase in adjusted pre-tax profit to $12.1 billion.

Mr Quinn, the 57-year-old HSBC veteran, was appointed interim chief executive in August last year following the ousting of John Flint.

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