HSBC announced they will slash 35,000 jobs as annual profits plunge 33%
HSBC (HBCYF) on Tuesday said it would cut around 35,000 jobs and dramatically overhaul its business worldwide after reporting a 33% profit plunge in 2019.
The bank’s headcount is expected to drop from 235,000 to around 200,000 over the next three years, a company spokesperson confirmed.
That would slash about 15% of its global workforce, though the exact number has not been finalized.
The bank’s plan also involves scrapping about $100 billion in assets by the end of 2022, and it will reduce costs by $4.5 billion.
The London-based bank detailed its strategy while disclosing annual results. The pre-tax profit drop — it pulled in $13.3 billion last year, compared to nearly $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.
HSBC shares in Hong Kong fell around 2% on the dismal earnings report.
“Parts of our business are not delivering acceptable returns,” interim CEO Noel Quinn said in a statement. “We are therefore outlining a revised plan to increase returns for investors, create the capacity for future investment, and build a platform for sustainable growth.”
HSBC said that it would maintain its dividend, but added that it would make cuts to its sales and trading and equity research units in Europe, as well as shift more resources from the United Kingdom to Asia.
It also plans to consolidate many of its divisions globally to save money. The bank will cut a third of its branches in the United States, where it wants to reposition itself “as an international client-focused corporate bank.”
Its investment banking team will also see major changes. While London will remain the group’s global hub, HSBC said it would reorganize its global banking and markets team to focus more on Asia and the Middle East, where it plans to shift more resources and build up its position in emerging markets.
“Around 30% of our capital is currently allocated to businesses that are delivering returns below their cost of equity, largely in Global Banking and Markets in Europe and the US,” Quinn wrote in a report to shareholders Tuesday.
The strategy overhaul comes as HSBC contends with a growing list of negative headwinds, including falling interest rates, making lending less profitable, months of protests in Hong Kong and now the coronavirus outbreak in mainland China.
HSBC said in August that it would cut up to 2% of its global workforce, about 4,700 positions, with a focus on senior employees.
The lender derives the vast majority of its profit from Asia, where the bulk of coronavirus cases outside China have been reported.
It warned Tuesday that the ongoing virus outbreak was “causing economic disruption in Hong Kong and mainland China and may impact performance in 2020,” adding that it has “created significant disruption for our staff, suppliers and customers, particularly in mainland China and Hong Kong.”
The bank has also faced several management changes since John Flint stepped down as chief executive in August, after less than two years in the role. Noel Quinn was appointed interim CEO and promptly set about making a string of senior leadership changes.
Analysts had expressed concerns that Quinn has not already been confirmed as HSBC’s permanent CEO, given the management shakeup he has spearheaded and the fact that he was to announce Tuesday’s strategy update.
HSBC addressed the topic Tuesday, saying that the appointment process remained “ongoing.”
The bank expects to announce a permanent CEO “within the six to 12 months initially outlined,” it added.