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HSBC Remains EU's Largest When It Comes to Assets But Will Get Smaller By 35,000 Jobs

HSBC Remains EU's Largest When It Comes to Assets But Will Get Smaller By 35,000 Jobs

HSBC (NYSE: HSBC), Europe's largest bank in terms of assets, revealed a major reorganization decision that would decrease the total number of staff from 235,000 to around 200,000 in the next three years. This is a decrease of 15% in the workforce, and it is probably one of the deepest restructuring moves in the bank's history.

HSBC currently operates in 64 countries, so it expected that most of its subsidiaries will be affected by the staff reduction. Union officials asked for a prompt meeting with HSBC, to discuss the announced cuts, despite the fact that HSBC still makes billions of profit.

HSBC's Last Quarter Results

Refinitiv forecast for HSBC's pre-tax profit of $19.83 billion was missed for almost 33%, achieving only $13.35 billion. Noel Quinn, interim CEO, stated that the $7.3 billion goodwill impairment in Europe came from the adjustment of long-term expectations, having in mind the planned restructuring of the bank, and banking business itself. Bank's European businesses had a significant part in lower pre-tax profit decrease in the amount of $4.65 billion.

Despite the announced job cuts, £3.3bn was set aside for bonuses, which is nearly 4% down compared to last year.  Revenues in 2019 were $56.1 billion, which is a rise of 4.3% compared to the previous year. On the other hand, operating expenses were also increased, for more than 22% (to $42.35 billion), primarily due to the goodwill impairment. Earning per share was $0.30.

Noel Quinn, who took over as interim chief executive after John Flint stepped down, was worried about the pressure from the impact of ongoing coronavirus outbreak in Asia, where HSBC gets substantial earnings, since the outbreak, at year's beginning, has made considerable disruptions for customers, suppliers, as well as staff, mostly in mainland China and Hong Kong.

China Embraced Paypal

The beginning of the year was also significant for PayPal (NASDAQ: PYPL) but in a more positive manner. Just before the end of 2019, PayPal officially finished its acquisition of a Chinese licensed payment company GoPay. The deal has been in process since September. This entry, into China's domestic payment market, made PayPal the first foreign payment company to own the domestic payment license. PayPal, being the major player in the U.S. retail payment market, will have to position itself in China, since there are already payment companies present, like Alibaba Group Holding LTD's Alipay (NYSE: BABA), Tencent's WeChat Pay (OTC: TCEHY) and UnionPay.

Outlook – Restructuring Plan

Planned restructuring can be ranked as high-level, and it will take place in the next two to three years. In that period, stuff will be decreased for 35.000, or approximately 15% of today's stuff.

Depending on geographical location, reductions will be as follows. European business will be reduced in segments of sales and trading, as well as some segments, like transition structured products, will be moved to Asia. The branch network in the U.S. will be reduced approx. 30%. Globally, more resources will be moved to Asia, and also the Middle East.

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