By Simon Clark and Margot Patrick
LONDON -- HSBC Holdings PLC said it would cut 35,000 jobs and
$100 billion in assets in the next three years as it scales back
operations in the U.S. and mainland Europe, as well as its
investment bank.
Europe's biggest lender by assets plans to invest more in its
fast-growing Asian and Middle Eastern operations to boost profit.
HSBC operates in more than 50 countries but makes half of its
revenue in Asia.
The bank said Tuesday that net profit fell 53% to $5.97 billion
last year, hit by a goodwill impairment of $7.3 billion.
HSBC's London-listed shares were down 6% Tuesday as the bank
said it would suspend share buybacks for two years, and analysts
said the restructuring plans came with significant risks.
The benefits of the restructuring will be evident largely from
2023 onward, said Citigroup analyst Ronit Ghose, who recommended
that investors sell HSBC shares.
The 155-year-old lender is reorganizing its business as
political challenges destabilize its main markets. It is dealing
with uncertainty surrounding the U.K.'s departure from the European
Union, antigovernment protests in Hong Kong and trade tensions
between the U.S. and China.
HSBC has reduced its expectations for Asian economic growth in
2020 as a result of the coronavirus outbreak, Chairman Mark Tucker
said. The bank said loan losses could rise and revenue could fall
if the outbreak is prolonged.
The restructuring is being led by Chief Executive Noel Quinn,
who replaced John Flint in August on an interim basis. Mr. Quinn is
vying for the permanent role of CEO, which the bank said would be
decided this year.
HSBC will exit businesses "where necessary," Mr. Quinn said.
"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 U.S.," he said.
Chief Financial Officer Ewen Stevenson told journalists there
would be "meaningful job cuts" in HSBC's investment bank and
headquarters in London.
The bank, which employs 235,000 people, expects to incur around
$7.2 billion of costs related to the restructuring in the next few
years.
The strategy pulls HSBC closer to its Asian roots. The bank was
founded in 1865 in Hong Kong and Shanghai to finance trade with
Europe. London will remain a hub for the investment bank, but
increasingly will play a supporting role to operations in Hong Kong
and Singapore.
"We are going to move more of our investment banking and global
markets resources into Asia -- more of our sector specialists, more
of our product specialists -- we are going to look to base in Hong
Kong and the rest of Asia," Mr. Quinn said in an interview. "We
will still have a presence in London but it's fair to say the mix
is going to change over the next two to three years."
Turbulence at HSBC is sapping morale within the bank, with 58%
of employees saying they saw "the positive impact of our strategy"
in 2019, down from 67% in 2018, according to a poll conducted by
the lender.
Globally, the lender will combine its retail-banking business,
wealth-management unit and private bank into one entity to cut
costs. It will shed $100 billion of its risk-weighted assets, which
totaled $843.4 billion at the end of last year.
António Simões, the CEO of HSBC's private bank, is set to leave
later this year.
HSBC's retail and commercial bank serving U.K. customers remains
"very important," Mr. Quinn said, adding that he expects it to
become increasingly tied to the rest of the world as the country
leaves the EU.
In continental Europe, where HSBC's French business is up for
sale, the bank plans to reduce its risk-weighted assets by 35% by
the end of 2022.
In its long-struggling U.S. arm, Mr. Quinn said HSBC would cut
assets in investment banking and markets by almost half, and shut
around 70 of its 229 branches. The retail bank will target
"internationally affluent" individuals across the country, Mr.
Quinn said.
"It will require a larger reduction in our branch network on the
east coast," Mr. Quinn said. "We are going to be opening up more
branches in the international markets that are relevant to HSBC,
principally on the west coast of America."
As of September, HSBC was the U.S.'s 14th-largest commercial
bank, according to Federal Reserve data, with around $181 billion
in assets. Mr. Quinn said he had considered putting the unit up for
sale but decided against it because the U.S. is a crucial part of
the bank's global network.
In mainland China, HSBC has for years positioned itself to take
advantage of growing economic ties between the most populous nation
and the wider world, but that integration is now challenged by the
trade conflict with the U.S.
"The agreement of a phase-one trade deal between China and the
U.S. is a positive step, but we remain cautious about the prospects
for a wider-ranging agreement given disagreements that still exist,
particularly over technology," Mr. Tucker said.
Mr. Quinn, formerly the global commercial-banking head at HSBC,
was elevated after Mr. Tucker decided new leadership was needed,
ending Mr. Flint's three-decade career at the bank with limited
public explanation.
Mr. Tucker brushed aside questions Tuesday about whether it made
sense for Mr. Quinn to announce a restructuring when he may not see
the changes through. He said the restructuring and the selection of
the new CEO were separate processes running in parallel.
Write to Simon Clark at simon.clark@wsj.com and Margot Patrick
at margot.patrick@wsj.com
(END) Dow Jones Newswires
February 18, 2020 11:35 ET (16:35 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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