Market Overview

HSBC To Restructure, Close Jobs And Offices After Missing Earnings Expectations

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HSBC To Restructure, Close Jobs And Offices After Missing Earnings Expectations

HSBC Holdings Plc (NYSE: HSBC) reported pre-tax earnings that missed analysts’ expectations on Tuesday. The bank also said that it plans to restructure over the next two years.

What Happened

HSBC reported its annual results for the 2019 year on Monday. The London-based international bank reported pre-tax profits of $13.35 billion and a revenue of $56.1 billion.

CNBC reports that the bank also plans to cut 35,000 jobs as a part of a wide restructuring plan that also involves canceling share buy-backs for 2020 and 2021. 

Write-offs linked to global banking and markets, as well as commercial banking businesses in Europe, contributed to a $7.3 billion drop in profit for HSBC. 

Noel Quinn, HSBC Group Chief Executive, said in a video released by the bank, “We also have to acknowledge that we have some challenges. We are taking decisive action today to address those underperforming parts of the business, to redistribute capital to the growth opportunity, to simplify our business.” He said that these actions would reduce the cost base of HSBC and allow the bank to grow.

In its annual report, the company also stated that the coronavirus outbreak created “significant disruption” for its staff, suppliers, and customers in China and Hong Kong.

What's Next

Going forward, HSBC will undertake a group-wide simplification. According to Reuters, HSBC is Europe’s biggest bank by assets, but most of its revenue comes from Asia. 

HSBC now has plans to target a reduced adjusted cost base of $31 billion or lower in 2022. This will be done by following a plan that aims to reduce costs by $4.5 billion. Sales, trading, and equity research in Europe will also be reduced.

In the United States, the bank plans to close 224 branches and will, in the future, target only international and high-income customers.

The global banking investment hub in London will be kept intact, but the bank plans to shift more resources to Asia and the Middle East from Europe, reports CNBC.

Price Action

HSBC shares closed 0.71% lower at $37.94 in New York on Friday and were unchanged in the after-hours.

HSBC shares traded at $7.69 higher by 0.25% at press time in London.

 

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