Published: Tue, February 18, 2020
Markets | By Otis Pena

HSBC cuts bonuses and senior managers in strategy overhaul

HSBC cuts bonuses and senior managers in strategy overhaul

In the overhaul announced on Tuesday, HSBC will slash about 35,000 staff - 15% of the total - and take $7.3 billion of charges, while it doubles down on Asia, source of most of the bank's profit, and cuts operations in the USA and Europe.

"The totality of this program is that our headcount is likely to go from 235,000 to closer to 200,000 over the next three years", Noel Quinn, interim chief executive, told news agency Reuters.

It said that it plans to revamp its US and European business and shed $100 billion in assets to improve its profitability.

Europe's largest bank by assets announced the effort Tuesday as it revealed net profits plunged 53 percent previous year to $6 billion amid political unrest in Hong Kong, uncertainty about the UK's split from the European Union and the lingering threat of the coronavirus outbreak.

"The Group's 2019 performance was resilient, however parts of our business are not delivering acceptable returns", admitted Quinn in a statement from its latest results. The bank employs more than 40,000 people in the United Kingdom, it said.

The bank reported 33 per-cent fall on its annual profit past year, to 13.3 billion dollars, as revenue rose by 4 per-cent and costs were up to 22 per-cent.

Cutbacks at HSBC will also extend into parts of its European and USA investment banking businesses, particularly in fixed income. The unit has underperformed its commercial and retail banking counterparts in recent years, recording higher costs and a lower share of profits.

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Addressing the impact of coronavirus, HSBC said the full effect has not fully been accounted for in today's earnings, raising the possibility that it could further increase the amount it expects the the outbreak to cost the bank. But he said that some of the reductions would come from attrition as opposed to outright cuts.

Fears over the coronavirus outbreak have hit staff and customers, with long-term revenues being impacted due to disrupted supply chains, Quinn added.

It also warned of "significant charges" in the fourth quarter - including those related to restructuring - if the backdrop worsened further. HSBC had been forecast to report an adjusted pretax profit of $21.8bn, according to analysts.

The lender will bolster its investment banking units in Asia and the Middle East. Questions have mounted over HSBC's relatively poor returns given its exposure to numerous world's fastest-growing economies, particularly China.

HSBC's building in Canary Wharf is seen behind a City of London sign outside Billingsgate Market in London, August 8, 2018.

The bank will also reduce its sales and research coverage in European cash equities with a focus on supporting equity capital market transactions, it said.

Group return on tangible equity, which stood at 10% in the nine months ended September 30, would jump to 14% if the US and European operations were removed, although a full exit is not possible given that HSBC benefits from its global network, an investor note by Goldman Sachs in December showed.

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