New HSBC boss slashes costs, targets fast-growing markets
Asia-focused giant HSBC launched drastic plans on Wednesday to slash costs, sell non-profitable retail businesses and refocus on growth, as new boss Stuart Gulliver sought to make his mark and draw a line under the global financial crisis.
The lender, which survived the 2008 crisis without state aid unlike many rivals, announced in a strategic review that it would seek to save $2.5-3.5 billion (1.7-2.4 billion euros) in costs by 2013.
Chief Executive Stuart Gulliver, who took the reins in January and unveiled mixed first-quarter earnings just two days ago, said the enormous cost savings would be ploughed back into fast-growing markets around the world.
"Our strategy is to be the leading international bank, concentrating on commercial and wholesale banking in globally connected markets," said Gulliver in the strategy update, issued to coincide with HSBC's investor day in London.
"We will also focus on wealth management in 18 of the most relevant economies and limit retail banking to those markets where we can achieve profitable scale."
He added: "We will increase capital deployment discipline, directing investment to faster growing markets and businesses as we scale back elsewhere."
HSBC will also conduct a separate assessment of its US branch network and cards business, which Gulliver added would only be sold for a "sensible" price. Other cash-saving measures will include streamlining IT operations and simplifying the group's organisation.
"The new chief executive is clearly attempting to stamp his mark on the company," said Hargreaves Lansdown analyst Keith Bowman in response to the news.
Chairman Douglas Flint told journalists that it was the first time in four years that the bank had choices, having dealt with the fallout from the global financial crisis in recent years.
"Today we can look forward, and look forward with confidence," he told reporters.
HSBC had announced on Monday that net profits surged 58 percent to $4.15 billion in the first quarter on lower taxes and bad debts.
However, at the same time, Europe's biggest bank also revealed that its pre-tax gains were pushed down by rising staff costs and by money set aside to compensate customers in Britain who were mis-sold credit insurance.
Pre-tax profit fell eight percent to $5.5 billion, undershooting expectations of $6 billion.
"We will continue to invest in markets with strategic relevance and high actual or potential returns and will either turn around or dispose of other businesses," said Gulliver on Wednesday.
An HSBC spokesman stressed that it was too early to give guidance on headcount because the group was still in the process of the review, and added that growth markets did not just refer to traditional emerging markets.
"Headcount clearly will be lower," Gulliver told reporters at the investor day.
HSBC is headquartered in London but the group was founded in Hong Kong and Shanghai in 1865 and the bank regards Asia as its most important region.
In early afternoon trade, HSBC shares were down 0.46 percent at 653.20 pence in a slightly higher London market.
"What we have seen recently is a large group of companies that have newly appointed chief executives undertaking a change of strategy -- of which HSBC is an example with Stuart Gulliver," said Atif Latif, director of trading at Guardian Stockbrokers.
"He has to make some bold calls to make sure that growth areas are maintained and operations where there seems to be limited upside are being wound down.
"The focus for cost efficiency -- by closing down underperforming units and dealing with for example the US arm -- shows that tough calls are being made to streamline operations. Operations such as Asia will be the focus."
© 2011 AFP