HSBC today said it would cut 30,000 jobs by 2013 in an effort to reduce costs by $2.5 billion to $3.5 billion, by far the largest reduction in force to date in the recent spate of layoffs by financial institutions. That amounts to about 10% of the institutions global workforce.
Although profits in the first half of this year were up 45% over the previous half, operating expenses were also on the rise, as other financial institutions have discovered. HSBC estimates its costs were up 10% over the first half of 2010.
Douglas Flint, HSBCs group chairman, painted a dire picture of the state of the financial markets in a statement this morning. The pace and quantum of regulatory reform continues to increase at the same time as the global economy appears to be losing momentum in its recovery, he said. We are concerned about the possible pro cyclical impacts of further deleveraging of the global economy arising from the regulatory reform agenda, at the same time as sovereign credit concerns and fiscal consolidation challenges become more critical.
But HSBC said in the statement that it “remain[s] positive on the outlook for emerging markets,” particularly the Middle East, where it dominates the sub-custody business.
Five thousand workers in Latin America, the US, Britain, France and Western Asia have already been laid off this year, according to HSBC, with the remaining 25,000 staff to be cut over the next two years. As part of the cost-reduction plan, the bank has closed its retail businesses in Russia and Poland; disposed of three insurance businesses; shuttered 195 retail branches, mostly in New York; and is considering selling its credit card business.
HSBCs net fee income attributable to global custody in the first half this year was $391 million, up from $261 million in the previous quarter but down from $439 million in H1 2010. Service providers such as custodians have seen considerable rises in asset servicing profits lately.
HSBC CEO Stuart Gulliver revealed the plan for job cuts on the firms first-half 2011 earnings call this morning.
(CG)