HSBC doubles target to US$2b in extra revenue
Source: Bloomberg News |
May 18, 2012, Friday
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HSBC Holdings Plc, Europe's largest bank, doubled its target for generating additional revenue from greater cooperation among its four businesses to US$2 billion.
The lender, based in London, is also on schedule to meet the top end of its target for eliminating as much as US$3.5 billion of costs by the end of next year, according to a filing to the Hong Kong stock exchange yesterday.
Chief Executive Officer Stuart Gulliver, 53, who took over in January 2011, pledged in May last year to cut costs as a percentage of revenue and increase return on equity, a measure of profitability, to at least 12 percent by retreating from less profitable markets. He's announced the sale of 28 businesses since the start of last year.
"Revenue growth is a key issue HSBC needs to address, and revenue growth tends to be harder to achieve than cost savings," said Gary Greenwood, an analyst at Shore Capital in Liverpool, England. "The market tends to be a bit more skeptical on those than cost savings and they take longer to get priced in."
Revenue gains will come from "further cooperation between" HSBC's investment bank "and commercial banking and between commercial banking and the private bank," Gulliver said on a conference call yesterday.
"It's as simple as things like ensuring foreign-exchange deals are done at our end in trade finance rather than at another bank's end," he said.
Gulliver has announced about US$6 billion of asset sales, led by its disposal of its US credit card unit to Capital One Financial Corp for a premium of US$2.5 billion. It agreed in August to sell its upstate New York branch network to First Niagara Financial Group Inc for about US$1 billion.
"The revenue synergy and the revenue target are encouraging as it suggests that HSBC's cost-efficiency effort is not just focusing on reducing costs," Sandy Mehta, CEO of Hong Kong-based Value Investment Principals Ltd, said by telephone yesterday. "That's a fine balance."
The bank has increased its estimate for potential additional revenue from integrating its four global businesses in the "short to medium term" by US$1 billion, Gulliver said in the statement. HSBC said a year ago it would encourage greater cooperation among its investment and commercial banking units to create US$1 billion in extra revenue.
The bank will focus on the "priority markets" of Argentina, Brazil and Mexico.
The lender, based in London, is also on schedule to meet the top end of its target for eliminating as much as US$3.5 billion of costs by the end of next year, according to a filing to the Hong Kong stock exchange yesterday.
Chief Executive Officer Stuart Gulliver, 53, who took over in January 2011, pledged in May last year to cut costs as a percentage of revenue and increase return on equity, a measure of profitability, to at least 12 percent by retreating from less profitable markets. He's announced the sale of 28 businesses since the start of last year.
"Revenue growth is a key issue HSBC needs to address, and revenue growth tends to be harder to achieve than cost savings," said Gary Greenwood, an analyst at Shore Capital in Liverpool, England. "The market tends to be a bit more skeptical on those than cost savings and they take longer to get priced in."
Revenue gains will come from "further cooperation between" HSBC's investment bank "and commercial banking and between commercial banking and the private bank," Gulliver said on a conference call yesterday.
"It's as simple as things like ensuring foreign-exchange deals are done at our end in trade finance rather than at another bank's end," he said.
Gulliver has announced about US$6 billion of asset sales, led by its disposal of its US credit card unit to Capital One Financial Corp for a premium of US$2.5 billion. It agreed in August to sell its upstate New York branch network to First Niagara Financial Group Inc for about US$1 billion.
"The revenue synergy and the revenue target are encouraging as it suggests that HSBC's cost-efficiency effort is not just focusing on reducing costs," Sandy Mehta, CEO of Hong Kong-based Value Investment Principals Ltd, said by telephone yesterday. "That's a fine balance."
The bank has increased its estimate for potential additional revenue from integrating its four global businesses in the "short to medium term" by US$1 billion, Gulliver said in the statement. HSBC said a year ago it would encourage greater cooperation among its investment and commercial banking units to create US$1 billion in extra revenue.
The bank will focus on the "priority markets" of Argentina, Brazil and Mexico.
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