On October 22nd, HSBC announced a large-scale restructuring, merging some businesses and dividing its operations into East and West based on geographical locations. This move is in response to the escalating geopolitical tensions and the need to reduce costs.
The group consolidated its operations into four main business lines: UK, Hong Kong, Corporate and Institutional Banking, International Wealth Management, and Premier Banking. Business from the Asia Pacific and Middle East regions will be integrated into the East market framework, while the West market will include continental Europe, the Americas, and the UK (excluding UK retail banking).
HSBC’s newly appointed CEO, Georges Elhedery, stated in a memo to employees that this new leadership structure will “unlock our full potential and drive future success.”
HSBC, one of the world’s largest banking groups, has 214,000 employees globally. Many countries around the world are currently cutting benchmark interest rates, directly impacting HSBC’s profits.
In an effort to reduce costs and boost revenue, the group is aiming to eliminate redundant roles and focus more on Asia.
This reorganization also presents Elhedery with the opportunity to tackle one of HSBC’s most challenging issues.
With over 1.2 million clients in its commercial banking sector, ranging from startups to large corporations, there is potential for significant profit growth by persuading these clients to purchase more products.
However, internal sources at HSBC previously revealed that senior executives in the commercial division have been trying to protect their clients, avoiding investment bankers from the global banking division selling products to these commercial clients.
By merging the commercial and global divisions (excluding Hong Kong and the UK) into the new Corporate and Institutional Banking, Elhedery hopes to drive closer collaboration and achieve the bank’s recent focus on cross-selling more products to international clients.
HSBC did not specify the expected cost savings or how many job positions will be affected, but more details may emerge when the bank announces its third-quarter performance on October 29th (next Tuesday).
These changes are expected to take effect in 2025. Reports suggest that Elhedery’s goal, who took office in September, is to achieve cost savings of up to $300 million (approximately £231 million) through this reform.
Elhedery appointed 60-year-old Pam Kaur as Chief Financial Officer. She previously held the position of Chief Risk and Compliance Officer at HSBC Group. According to reports, she is the first female CFO in HSBC’s 179-year history, a position formerly held by Elhedery himself. Kaur joined the bank over a decade ago.
HSBC will also reduce the members of the company’s main decision-making body, the Executive Committee, from 18 to 12, and rename it to the Group Operating Committee.
In other key management changes, Greg Guyett, the CEO of Global Banking and Markets, will take on the new role of Chairman of Strategic Clients Group.
Colin Bell, the head of the lending institution in Europe, was considered a potential candidate for CEO, but an internal memo stated that he will leave the bank, while Stephen Moss, the head for the Middle East region, will also depart.
Analysts point out that while HSBC’s organizational restructuring appears comprehensive, it does not fully address the challenge of maintaining profits amid global interest rate cuts.
Ben Toms, an analyst at RBC Capital Markets, commented, “Today’s announcement is just a reshuffling of various parts of the group and does not change the overall picture.”
The real concern in the market is, considering HSBC’s cost-cutting efforts to cope with revenue pressure, which parts of the group may be the next targets for job cuts, and how much this reorganization will cost the bank.
HSBC’s price-to-book ratio is 0.89, relatively high among European peers, with Barclays and Deutsche Bank’s price-to-book ratios at 0.52 and 0.46, respectively. The price-to-book ratio compares a company’s market value to its net assets per share, generally indicating higher investment value for stocks with lower ratios.
On Tuesday, HSBC’s stock price saw no significant change, while the FTSE 100 index dropped by 0.6%. Over the past year, HSBC’s stock price has risen by 12%, lagging behind the 33% increase of the STOXX index for European benchmark banks.
【This article referenced reports from Reuters and UK PA Media】