HSBC set for huge cost cuts
By Kelvin Soh and Steve Slater |
May 12, 2011, Thursday
|
Print Edition
Print Edition
HSBC'S new boss is to cut back on wealth management and retail banking and may sell the bank's United States credit card arm in a bid to cut US$3.5 billion in costs and revive flagging profits.
Europe's biggest bank said the retreat from high street services in some countries and other savings would help it cut costs as a share of revenue to 48-52 percent by 2013 from 61 percent in the first quarter.
Many banks, including HSBC, have seen this ratio rise sharply as they compete for staff in Asia. By comparison, rival Standard Chartered's cost/income ratio was 56 percent last year.
"We clearly have a cost problem," Chief Executive Stuart Gulliver said during a presentation to explain his strategic overhaul yesterday.
The extent of Gulliver's task was laid bare on Monday this week, when the bank's results showed a jump in costs dragging quarterly profits down some 14 percent.
"We're a very large firm that delivers significant profits but we're complex, and historically we've struggled to tell a coherent story about why our shareholders should own us," said the CEO, who took the job on at the start of the year.
HSBC will focus its wealth management business on 18 of the most relevant economies, and limit retail banking to markets where it can achieve profitable scale, it said.
Currently, the bank has operations in 87 markets. It has 95 million customers and employs 307,000 staff. In retail banking it will focus on core markets such as Hong Kong and Britain, high growth markets like Mexico, Singapore, Turkey and Brazil.
Selling the US card business could free up as much as US$25 billion of capital, analysts have estimated.
Europe's biggest bank said the retreat from high street services in some countries and other savings would help it cut costs as a share of revenue to 48-52 percent by 2013 from 61 percent in the first quarter.
Many banks, including HSBC, have seen this ratio rise sharply as they compete for staff in Asia. By comparison, rival Standard Chartered's cost/income ratio was 56 percent last year.
"We clearly have a cost problem," Chief Executive Stuart Gulliver said during a presentation to explain his strategic overhaul yesterday.
The extent of Gulliver's task was laid bare on Monday this week, when the bank's results showed a jump in costs dragging quarterly profits down some 14 percent.
"We're a very large firm that delivers significant profits but we're complex, and historically we've struggled to tell a coherent story about why our shareholders should own us," said the CEO, who took the job on at the start of the year.
HSBC will focus its wealth management business on 18 of the most relevant economies, and limit retail banking to markets where it can achieve profitable scale, it said.
Currently, the bank has operations in 87 markets. It has 95 million customers and employs 307,000 staff. In retail banking it will focus on core markets such as Hong Kong and Britain, high growth markets like Mexico, Singapore, Turkey and Brazil.
Selling the US card business could free up as much as US$25 billion of capital, analysts have estimated.
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