Back in February, HSBC, Europe’s largest bank and troubled lender, announced a plan that would slash upwards of 35,000 jobs. Shortly after, the lender put restructuring plans on hold for three months due to the COVID-19 outbreak. Now, Bloomberg reports, HSBC is resuming plans to cut tens of thousands of jobs as a way to boost profitability in today’s challenging environment.
“Since February, we have pressed forward with some aspects of our transformation program, but we now need to look to the long term and move ahead with others, including reducing our costs,” CEO Noel Quinn wrote in a memo obtained by Bloomberg.
“Against this backdrop, I’m writing to let you know we now need to lift the pause on job losses,” Quinn said. “I know that this will not be welcome news and that it will create understandable concern and uncertainty, but I want to be open with you about the reality of the current situation.”
Quinn unveiled plans to “remodel” large parts of the bank in late 2019. The actual restructuring wasn’t revealed until February — which said the global lender’s 235,000 workforce will be lowered by 35,000 over the next three years. As the lender shrinks its footprint, it expects to save $4.5 billion at underperforming units.
“Europe and the U.S. are expected to face the brunt of the cuts as HSBC attempts to turn around its businesses in regions where it has struggled to make money. The lender’s global banking and markets business, which houses its corporate advisory and market units, is expected to face significant reductions in areas such as equities sales and trading.
“HSBC is eyeing the sale of some of its businesses and is already looking for a buyer for its French retail operations, the disposal of which would take several thousand staff off its payroll,” Bloomberg notes.
A downturn in the global economy, no recovery for several years, and a harsh operating climate, HSBC is expected to announce deeper cuts:
“Despite banks’ commitments to retain staff through the pandemic crisis, we believe it is only a matter of time before substantial further cost-trimming plans are announced, with efficiencies identified as we work through the COVID crisis important in this context too,” John Cronin, an analyst at Goodbody, wrote in a note.
HSBC shares have widely underperformed European peers
HSBC negatively diverges global stocks
European banks have been operating in an ultra-low interest rate environment, strict regulations, and a continually evolving industry where fintech companies have upended old banking business models.
Doubleline Capital CEO Jeffrey Gundlach recently said in his DoubleLine Total Return Bond Fund webcast that negative interest rates had killed bank stocks in Europe and Japan.
We noted in late 2019, 50 banks laid off 77,780 jobs, the most since 91,448 in 2015 — we’re assuming by now, in a post-corona world, where the global economy is in recession — that a record number of banking jobs will be lost from now until the end of 2021.
Most of the HSBC job cuts will be based in Europe and the US.