HSBC Holdings Plc will eliminate as many as 25,000 jobs through 2017 as Chief Executive Officer Stuart Gulliver seeks to cut annual costs by about $5 billion to restore profit growth.
Europe’s largest bank plans to reduce full-time employees by 22,000 to 25,000, or about 10 percent, it said in a presentation to investors on its website on Tuesday. Under the three-year plan, HSBC will cut costs by an annual $4.5 billion to $5 billion, exit businesses and target a return on equity, a measure of profitability, of more than 10 percent.
Gulliver, 56, is looking to restore investor confidence in a bank battered by a series of scandals and surging compliance costs. Since taking over in 2011, he’s announced more than 75,000 jobs cuts, exited about 78 businesses and reduced the number of countries the bank operates by 15 to 73.
“The initiatives taken by management are all welcome,” Sanford C. Bernstein said in a report led by analyst Chirantan Barua in London, with a market perform rating on the shares. Still, HSBC “has failed to bring out anything radically different from moves which have been widely expected for some months now.”
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The company’s shares fell 0.8 percent to 614.6 pence at 8:10 a.m. in London. They have gained about 1 percent this year, trailing Standard Chartered Plc, the other U.K. bank generating most of its earnings in Asia.
Just months after taking over, Gulliver announced some 30,000 jobs cuts over two years to trim costs by as much as $2.5 billion. In the latest round, as many as 21,000 of the cuts will stem from initiatives such as automation, digital banking and paring administrative roles, according to slides.
Under his plan, the CEO plans to cut risk-weighted assets by about $290 billion, including a reduction at the securities division to less than one third of the group’s RWAs, and target a return on equity of more than 10 percent by 2017. The bank cut its ROE target to 10 percent in February from as much as 15 percent. In 2014, it had an ROE of 7.3 percent.
The savings program will cost $4 billion to $4.5 billion through 2017, according to the statement.
“We recognize that the world has changed and we need to change with it,” Gulliver said in the statement. “I’m confident that our actions will allow us to capture expected future growth opportunities and deliver further value to shareholders.”
HSBC, founded 150 years ago in Hong Kong, will also sell operations in Turkey and Brazil, while stepping up investment in Asia, expanding asset management and insurance and focusing on places including China’s Pearl River Delta and areas including the internationalization of the yuan.
“Margins are higher” in Asia,’’ said Jonathan Tyce, senior banks analyst at Bloomberg Intelligence in an interview on Bloomberg Television from London on Tuesday. “Everybody’s all over Asia. This is all about improving capital efficiency. You can completely understand the motivation.”
“We recognize that the world has changed and we need to change with it”
With his strategy update, Gulliver is seeking to convince investors that he’s the right man to lead HSBC. At Deutsche Bank AG, Germany’s largest lender, co-CEO Anshu Jain announced his resignation on Sunday, just two months after presenting a strategic update that investors considered too weak.
“Gulliver is not an idiot,” said Chris Wheeler, an analyst at Atlantic Equities in London. “This is quite the opposite to Deutsche Bank as there is tonnes of granularity of where the cost cutting will come, how they’re achieving it and why they’re getting out of countries.”
HSBC has come under pressure to reduce costs and reverse a decline in profit after a year that saw the bank being fined for manipulating currency markets and embroiled in a tax-avoidance scandal in Switzerland.
The bank last week agreed to pay 40 million Swiss francs ($43 million) to close an investigation by Geneva prosecutors into allegations of money laundering at its Swiss private bank.
In February, Gulliver pledged that underperforming units would face “extreme solutions” after full-year earnings fell 17 percent and the lender scrapped four-year-old profitability targets, citing a tougher regulatory environment.
HSBC is among the hardest hit by regulator scrutiny, with the Bank of England forcing the largest lenders to separate their consumer from riskier investment banking activities by 2019. It’s also been hurt by an increasing bank levy, costing lenders about 5.3 billion pounds ($8 billion) over the next five years.
Now domiciled in the U.K., HSBC will complete a headquarters review by year-end, it said.