On Tuesday, HSBC Holdings PLC announced that in order to boost their profitability, they will be cutting 50,000 jobs.
As part of their major restructuring plans, HSBC will also exit Turkey and parts of Brazil, reduce their risk-weighted assets by $290 billion as well as ‘ring fence’ their bank in the United Kingdom.
The job cuts will reduce HSBC’s workforce by 10 percent.
As of the end of 2014, Europe's largest bank had 258,000 full-time employees. By exiting from Turkey and parts of Brazil, 50,000 jobs would be lost.
The bank is hoping to raise its return on equity by 2017 by 10 percent. In 2014, their return on equity was at 7.3 percent.
HSBC will also reduce their risk-weighted assets of the markets and global banking division to less than a third of group total. In monetary terms, this is a reduction of approximately US$140 billion. According to a recent UBS AG note, this HSBC division accounted for 43 percent of the bank’s risk weighted assets in 2014 and it includes capital markets activity and investment-banking. The markets and global banking division also represents over 65% of the group's assets overall.
The latest plans have been introduced by Stuart Gulliver, the Chief Executive of HSBC, who is taking the second stab at refocusing the London-based lender since he stepped into his position in 2011. Over the last 5 years, Gulliver has worked hard to streamline management at the bank while boosting HSBC's global presence.
His plans however have not been entirely successful as a result of low interest rates, a slowdown in Asia and well as growing compliance costs.
In fact, HSBC recently lowered a key profitability target. As a result, major investors called for Douglas Flint, HSBC Chairman, to be replaced soon while some analysts feel that the bank should break up.
With these challenges, HSBC will cut its franchise further and is also now targeting annual cost savings of between $4.5 billion and $5 billion by 2017.
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