HSBC board seeks deeper cuts in new revamp push - report
By Sean Farrell
Date: Tuesday 26 May 2020
(Sharecast News) - HSBC's board is seeking deeper cuts than the 35,000 job reductions already announced after deciding the Covid-19 crisis requires more radical measures, according to a report.
In February HSBC said it would cut about 15% of its global workforce over three years in the biggest restructuring in its history. The plan, designed to save $4.5bn (£3.7bn), included slashing its investment banking operations and closing almost one in three US branches.
The bank announced the plan before the coronavirus outbreak became a global pandemic, shutting down economies and prompting central banks to cut interest rates to new lows. HSBC set aside $3bn for credit losses in the first quarter, causing profit to halve, and is braced for losses of up to $11bn in 2020.
After putting cuts on hold during the crisis HSBC's board now wants Chief Executive Noel Quinn to find more radical changes, including further cuts and the possible sale of its US business and French retail bank, the Financial Times reported.
The board wants a new plan "sooner rather than later" but the review will take several months, a person familiar with talks told the FT. A US sale "is possible but it's very early in terms of making that decision", the person said.
Mark Tucker, chairman since October 2017, is leading the push for more cuts. The tough former insurance executive has faced criticism for his handling of the bank's CEO succession plan and HSBC's decision to scrap dividends at the request of the Bank of England. Some investors were also unimpressed by February's original restructuring plan.
The bank, which makes more than half its profit in Hong Kong, wants to get closer to its Asian roots after moving its headquarters to London in the 1990s. It has considered shifting its base back to Hong Kong. "What HSBC needs to understand is, for better or worse, their opportunity is in China," the person told the FT.
Tensions between Hong Kong and mainland China have increased after the Chinese government announced a national security law for the city. The measure risks further anti-Beijing protests and analysts fear it could undermine Hong Kong's position as an Asian financial hub. China has said the law will restore calm, making Hong Kong better for business.
There had been talk amongst some investors that the bank ought to refocus its attention back to the heart of Asia, particularly in the wake of senior management's decision to bow to pressure from the Bank of England pressure to cancel the dividend," Michael Hewson, chief market analyst at CMC Markets, said.
"Whether this is a wise decision given recent developments in Hong Kong is another matter. Nonetheless there does appear to be significant discussions going on at a senior level to look carefully at the bank's future direction and focus, in the wake of the prospect that the bank could well see a tsunami of non-performing loans, come its way.
HSBC shares rose 1.4% to 384.15p at 09:58 BST.
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