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HSBC Seeks to Slash Investment Bank Jobs for Cost Control

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Continuing with its cost-cutting efforts in order to enhance operating efficiency by divesting/closing non-core businesses, HSBC Holdings plc (HSBC - Free Report) intends to slash hundreds of jobs at the investment banking division by the end of this year. The news was first reported by Bloomberg, citing people with knowledge of the matter.

While no formal announcement has been made by the company yet, per the people familiar with the matter, nearly 500 jobs within its global banking and markets division will be affected by this move. This division includes HSBC's trading and investment banking businesses, the performance of which has not been up to the mark recently.

The job cuts are expected to begin in mid-June and will continue till the end of 2019.

This move is part of HSBC’s broader cost-cutting objective and marks the latest stage of its “Project Oak”, through which the company has been trying to shift operations to the most profitable businesses.

HSBC stated, “Business and function lines constantly re-evaluate their needs to ensure they have the right roles in the right locations.”

Notably, these job cuts through Project Oak will likely help CEO John Flint to achieve “positive jaws”. This has been a key focus area for Flint as he is deliberately trying to keep revenues growing at a faster rate than expenses.

Last year, Flint was unable to achieve his positive jaws target as growth in revenues did not outpace expense rise. Nonetheless, while first-quarter 2019 witnessed expense rise of nearly 3.2% due to increase in the number of investments for business growth programs, the company was able to meet Flint’s target of positive jaws.

In fact, Flint tightened his cost-cutting efforts recently. He has promised to maintain costs even more strictly to remain on track to achieve the company’s 2020 financial targets despite struggling with a “more uncertain economic outlook”.

While cost cutting remains a priority for the bank, it has been adding staff in some locations. It intends to increase headcount by nearly 300 in the retail wealth management division in Asia by the end of 2019, in a bid to strengthen performance and focus on building operations in the region.

Further, the bank seeks to boost its technology operations and hence, plans to add more than 1,000 jobs in China this year.

The company also intends to build upon its market share in transaction banking and deliver mid-to-high single digit revenue growth every year from HSBC’s international network. These efforts will go a long way in supporting profitability.

Shares of the company have gained 2.1% so far this year compared with 4.5% growth of the industry.

The stock currently carries a Zacks Rank #2 (Buy).

Other Stocks to Consider

Some other top-ranked stocks from the finance space are Cohen & Steers, Inc. (CNS - Free Report) , BlackRock, Inc. (BLK - Free Report) and Franklin Resources, Inc. (BEN - Free Report) . All these stocks currently sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Over the past 60 days, Cohen & Steers witnessed an upward earnings estimate revision of 6.9% for 2019. Its shares have surged 49.4% so far this year.

Over the past 60 days, the Zacks Consensus Estimate for BlackRock’s current-year earnings has been revised 5.2% upward. Its shares have gained 10.9% so far this year.

Franklin Resources has witnessed an upward earnings estimate revision of 8.9% for fiscal 2019, over the past 60 days. The company’s shares have improved 12.2% year to date.

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