HSBC Holdings PLC (HBC) is restructuring its business and trimming its workforce. The 30,000 layoffs in the next two years are part of the company’s effort to reduce costs.
The restructuring measures had commenced early this year in Latin America, the U.S., UK, France and the Middle East. These will result in a headcount reduction by 5,000. Now, the company is aiming for 25,000 more job cuts by 2013.
The decision to reduce workforce in these countries comes after the company experienced weaker revenues in the U.S. and Europe. Management is hopeful of saving $2.5–$3.5 billion in costs by 2013 with such a restructuring measure.
In the first half of 2011, HSBC reported total group revenues of $35.7 billion, stable with the prior-year first half. HSBC reported net profit attributable to ordinary shareholders of $8.93 billion, up 35% from $6.63 billion, primarily attributable to the impact of lower taxes.
While the company recorded double-digit revenue growth in Hong Kong, Rest of Asia-Pacific and Latin America, revenue declined in the U.S. as it continued to manage down balances in run-off portfolios, and in Balance Sheet Management as positions matured. The company also experienced weaker Credit and Rates revenues in Europe in Global Banking and Markets.
Going forward, HSBC expects growth in the U.S. and Europe to remain sluggish as long as the impact of high debt levels and government budget cuts weigh on economic activity.
In the UK, HSBC remains concerned that regulatory activities under contemplation and the ongoing regulatory uncertainty will constrain the supply of credit to the real economy, and result in sub-par economic growth.
Notably, HSBC has announced a number of closures and disposals. These included the closure of its retail businesses in Russia and Poland and the disposal of three insurance businesses. In the U.S., the company progressed on the strategic review of its credit card business and announced the disposal of 195 non-strategic branches, principally in upstate New York, to First Niagara Financial Group Inc. (FNFG) for $1 billion in cash.
While HSBC is planning for a job cut in these countries, it is refocusing on growth in the emerging countries and continuing to hire people to boost its business in those regions. Therefore, after taking into considering such hiring, the total job cut figure would actually be much smaller.
Similar to HSBC, other biggies such as UBS AG (UBS) and Barclays Plc. (BCS) are resorting to job cuts in an effort to reduce costs in light of the challenging market conditions in the U.S. and Europe. We expect the global banks to continue to trim workforce in the next couple of years until the economy improves substantially in these regions.
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