The bank HSBC (LSE: HSBA) has announced a massive overhaul of the business amid plunging profits. Alongside reporting a one-third fall in annual profit and the writing down of more than $7bn (£5.4bn) of assets today the group also revealed it’ll cut 35,000 jobs. Job losses were expected but on a much smaller scale. Around 10,000 were expected before today.
HSBC said it would cut $4.5bn in costs, slash its investment banking operations and close almost one in three US branches by 2022 in a revamp designed to increase returns. The scale of the change gives interim CEO Noel Quinn a shot at the permanent job. HSBC suddenly got rid of John Flint as CEO back in August after less than 18 months in charge. It was felt he was moving too slowly to overhaul the bloated bank.
Pretax profit for the year to the end of December fell 33% to $13.3bn as revenue rose to $56.1bn from $53.8bn. HSBC’s $7.3bn goodwill writedown included $4bn at its investment bank.
Interim chief executive Quinn said: “The group’s 2019 performance was resilient. However, parts of our business are not delivering acceptable returns. 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. We have already begun to implement this plan.”
HSBC is Europe’s largest bank by assets but makes around half of its revenue and 90% of its profit in Asia.
It has been grappling with a number of challenges in recent times including slowing growth in its main markets, the coronavirus, anti-government protests in Hong Kong, and the UK’s withdrawal from the European Union.
In its results, the bank said the coronavirus, which has infected more than 70,000 people around the world has affected its staff and customers. The coronavirus could hit revenue and trigger credit losses as the disease disrupts supply chains.
The shares have fallen over 6% today, despite the promise of massive cost savings.
Please note I own shares in HSBC.