HSBC Plans Hundreds of Investment Bank Job Cuts in Cost Push
HSBC will lay off 2% of employees and cut investment costs
HSBC Holdings PLC plans to cut thousands of jobs and cut investment costs following the unexpected resignation of CEO John Flint. HSBC said on Monday that Flint will step down as CEO after 18 months in the position..
The job cuts will target top positions and are expected to reduce the bank’s payroll costs by up to 4%, HSBC Group CFO Ewan Stevenson said. According to him, up to 2% of the bank’s 237,685 employees may lose their jobs, as HSBC noted the deterioration of the prospects for the global economy in the second quarter..
In a statement, HSBC Chairman Mark Tucker commented on Flint’s departure: «In an increasingly complex global environment in which the bank operates, the board of directors believes that changes must be made to meet the challenges we face and take advantage of our very significant opportunities.".
Reuters, citing a source familiar with the situation, reported differences between Flint and Tucker with regard to the speed and results of the HSBC strategy. These differences stem from Flint’s overly lenient approach to cutting costs and setting revenue targets for senior managers, which is not enough to grow profits..
During a conference call with investors and analysts on Monday, Tucker confirmed that «no disagreement on strategy».
«I think the element we need to work on is how we implement these priorities.», – he added.
In a conference call with investors and analysts, Stevenson said the turnaround in the bank’s American business «not going according to plan». He added that the bank is expected to fall short of its target of 6% ROI by 2020 given the challenging environment..
HSBC said it has appointed the bank’s interim CEO Noel Quinn, head of global commercial banking, until Flint’s successor is found..
Tucker said the bank has no fixed deadline for appointing a new CEO, but the search could take six to 12 months. The bank will consider both internal and external candidates, he added..
Flint, who took over as CEO in February 2018, began his career at HSBC in 1989 and has worked in most of the bank’s divisions. He announced plans to invest between $ 15 billion and $ 17 billion over three years in various fields, including technology and China..
His unexpected departure will leave investors wondering if there will be any changes to the bank’s strategy, said Joshua Crabb, senior portfolio manager at management company Robeco..
The bank released its latest income statement along with Flint’s resignation announcement. The bank said its profit before tax rose 15.8% year-on-year to $ 12.4 billion in the first six months of 2019, while revenues for the same period were 7.6% higher than a year earlier, at 29 , $ 3 billion.
Other financial indicators that analysts and investors saw in the bank’s statements:
- Net interest margin, a measure of lending return, was 1.61% – lower than 1.66% in June 2018.
- Earnings per share were $ 0.42, up from 0.36 a year ago.
- HSBC announced a $ 1bn share buyback, contrary to some analysts’ expectations, which could suspend its strategy to return additional capital to investors.
Ronald Wang, non-executive chairman of financial services firm Partners Financials Holdings, said HSBC’s latest results were «really good». However, investors should be careful before buying shares, he said..
«We need to keep an eye on what happens in Hong Kong and what happens in the UK with Brexit (which) will affect the bank’s corporate earnings in the second half of this year», – Wang said in an interview with CNBC «Street Signs».
HSBC is headquartered in London, but most of the income is from the banking group gets in Asia, especially China.