Continuing with its cost-cutting efforts to enhance operating efficiency amid challenging market conditions, HSBC Holdings plc (HSBC - Free Report) plans to reduce almost 4,000 jobs globally, which accounts for nearly 2% of its workforce.
This London-based bank, which generates more than half of its revenues in Asia, had nearly 237,685 full-time workers as of Jun 30, 2019.
The news came in after the company’s CEO, John Flint, announced his surprise departure from the firm. Concurrent with the second-quarter 2019 earnings release, it was announced that Flint stepped down as the CEO of the company. Flint remained CEO for nearly 1.5 years, after joining HSBC in 1989.
Now, Noel Quinn, the chief executive of global commercial banking, has been asked to take on the responsibility as the company’s interim CEO and join the board as an executive director. However, his final appointment is subject to regulatory approval.
Notably, HSBC said that it expects severance costs in 2019 to be nearly $650-$700 million.
The company did not mention where the cuts would take place but said that its focus would be on the more senior ranks.
Ewen Stevenson, the company’s chief financial officer, stated, “Most areas of the bank have been involved in cutting headcount.”
Stevenson added, “I'm not going to give too much colour on where the job cuts are coming. We want to speak to our people before we speak externally. Broadly, we are adding headcount where we see good growth and good returns. Various parts of Asia and Hong Kong would fall into that bucket. We're cutting headcount in other areas where there isn't the same growth and return dynamic.”
Last year, Flint was unable to achieve his positive jaws target as growth in revenues did not outpace rise in expenses. 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. Moreover, the second quarter witnessed marginal decline in adjusted expenses on a year-over-year basis.
Apart from HSBC, other companies have also been reducing workforce amid increasing geopolitical tensions — including the US-China trade war and the uncertainty related to Brexit.
Deutsche Bank (DB - Free Report) is expected to cut 18,000 jobs, and close its equity sales and trading business. Nomura Holdings, Inc. (NMR - Free Report) said that it would slash nearly 150 jobs this year while Citigroup (C - Free Report) planned to cut at least 100 jobs in its equities business.
While cost cutting remains a priority for HSBC, 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 to strengthen performance and focus on building operations in the region.
Shares of HSBC have lost 7.6% so far this year compared with a 1.5% decline of the industry.
Currently, HSBC carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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