Downsizing

HSBC is slashing 35,000 jobs in an effort to cut costs and boost its profitability

Image source: Vector Victor - Shutterstock

What's going on?

HSBC suddenly looks a whole lot smaller than it used to: the global bank announced plans on Tuesday to cut 15% of its workforce in one of its biggest overhauls since the financial crisis.

What does this mean?

HSBC has been planning to cut 10,000 staff for a while, but the bank upped that number to 35,000 on Tuesday as it tries to slash its annual costs by $4.5 billion. Those reductions will mostly be made to its poorly performing American and European businesses, and should free the bank up to focus more on Asia, where it makes half its total revenue.

But with the ongoing protests in Hong Kong and coronavirus outbreak in China, even HSBC’s Asian business could find itself struggling. That – as well as a two-year suspension of share buybacks while it focuses on the anticipated $7 billion overhaul – might be why its shares fell more than 5% on Tuesday.

Why should I care?

The bigger picture: Getting away with merger.
Banks – particularly European banks – have been struggling with weak economic growth lately, not to mention ultra-low interest rates that have reduced their loan income. One way they’re responding to the pressure it’s putting on profits is by combining with other banks and eliminating duplicate costs. Just look at Intesa Sanpaolo: the Italian bank launched a takeover bid for rival UBI Banca, which, if successful, will create the seventh-largest bank in the eurozone – and lead to over 5,000 job cuts of its own.

Zooming out: Speaking of jobs…
At least the UK economy added more jobs than forecast in the last three months of 2019, highlighting the strength of its labor market. It’s fueling investor speculation that the country’s central bank will hold off cutting interest rates this year, which would be welcome news for HSBC and its loan-distributing rivals. Not much consolation for their newly laid-off staff, mind you…

Originally posted as part of the Finimize daily email.

The top 2 financial news stories in 3 minutes. Join over 800,000 Finimizers

Read next

Land Of The Rising Glum

Sign up to Finimize

Get the two most important global financial news stories each day. Sent at midnight UK time.

Get started with one email a day

The top financial news stories in 3 minutes.