The interim chief executive, Noel Quinn, said Tuesday the number of people employed by the bank would fall from 235,000 to 200,000 in the next three years. Some of the reductions would come from attrition as opposed to outright cuts.
HSBC, which is based in London but does most of its business in Asia, is caught among myriad uncertainties, from Brexit to the Hong Kong protests and trade disputes between the United States and China. Now the new coronavirus is adding further concern as it disrupts business in HSBC’s main market.
The bank’s net profit fell 53% to $6 billion in 2019 and, for this year, it warned of “significant disruption” to its business due to the outbreak of the virus in China.
HSBC’s business in Europe is also under pressure. It must now also grapple with Britain’s departure from the European Union and the uncertainty that will accompany negotiations future trade relations.
“No trade negotiation is ever straightforward,” HSBC said in a statement. “It is essential that the eventual agreement protects and fosters the many benefits that financial services provider to both the U.K. and the EU.”
The whopping headcount drop comes amid a downsizing in Europe. The restructure involves “consolidating” of some parts of the business and “reorganizing the global functions and head office,” Quinn said.
The bank has been carrying out a corporate overhaul designed to boost profitability by focusing on high-growth markets in Asia while shedding businesses and workers in other countries. It plans to revamp its U.S. and European business and shed $100 billion in assets to improve profitability.
“Our immediate aims are to increase returns, create the capacity to invest in the future, and build a platform for sustainable growth,” Quinn said in the statement.
The sharp drop in 2019 profit reflected slower economic activity but also a $7.3 billion write-down for HSBC’s Global Banking and Markets and Commercial Banking divisions in Europe. Revenue rose 5.9% in 2019 to $55.4 billion.
The bank said it would shrink its sales and trading and equity research in Europe and shift resources to Asia. In the U.S., HSBC plans to grow its international-client corporate banking business.
HSBC had 10,000 employees in the U.S. as of Dec. 31, according to its 2019 annual report.
The bank, which once based its North American headquarters in north suburban Mettawa, had more than 6,000 employees in the Chicago area in 2007. It has since consolidated its Chicago footprint and relocated its headquarters to New York.
Rob Sherman, a spokesman for HSBC, declined to say Tuesday how many employees are currently based in the Chicago area, much less how many would be affected by the downsizing.
“We’re not sharing specific information on impacted roles by business lines, country or region just yet, as we want to talk to our people first,” Sherman said in an emailed statement.
In 2015, HSBC moved a reported 1,500 employees from Mettawa and Elmhurst to a new regional administrative office in Arlington Heights. That office remains opens along with a commercial banking center at 227 W. Monroe St., in Chicago, as well as data centers in Vernon Hills and Northlake, Sherman said.
Sherman said the company would rely, in part, on annual “natural attrition” of about 25,000 people globally to reduce its ranks.
“We will look to manage the achievement of our cost reduction plans in a sensitive and appropriate manner, balancing hiring with natural attrition,” Sherman said.
The restructuring is expected to cost $6 billion, with another $1.2 billion for asset sales, mainly in 2020 and 2021, the bank said.
HSBC’s troubles reflect those of the wider banking industry, which is under pressure from low-interest rates around the world. Banks tend to make less money when rates are low as it squeezes their lending business.
In Europe, many banks are still dealing with problems left over from the financial crisis. Deutsche Bank posted a loss for 2019 and is also restructuring and cutting thousands of jobs. Banks in Italy are still chipping away at a mountain of bad loans. Banco Santander, based in Spain, relied on profits from Latin American to make up for losses in Europe.
Richard Hunter, head of markets at financial services firm interactive investor, said in a note to clients that there are “few if any signs on the horizon of an uplift” to the profit-squeezing period of low-interest rates.
“There remain more questions than answers as HSBC looks to overhaul its business in radical fashion.””