Finance

HSBC plans 40% office space cut as Covid shifts bank to flexible working

HSBC is cutting its global office space by up to 40%, as the vast remote working programme over the course of the Covid-19 pandemic has forced banks to reassess how they do business.

The UK lender is making drastic cuts to its office space as the crisis has kept the majority of its workforce at home over the past year, its chief operating officer John Hinshaw said on 23 February in a presentation to analysts accompanying its annual results.

“We’ve analysed our worldwide real estate footprint and anticipate a reduction in the order of 40% over the next several years,” he said, adding that it would ensure its “remaining real estate has a lower environmental footprint”.

Investment banks are rethinking how their employees work in the wake of the pandemic, which has kept the majority of their workforce working from their kitchen tables, often while bringing in record revenues throughout 2020. HSBC is likely to move to a hybrid model, with some staff working from home for at least two days a week.

Chief executive Noel Quinn told journalists that the reduction would come from “head office” buildings rather than branch closures, as the bank expects more employees to spend an increasing proportion of time at home.

In London, where it occupies a 45 floor sky-scraper in Canary Wharf, Quinn said that would have a “higher occupancy per square foot” within its Canada Square headquarters, but would look to reduce other London office space when leases come around for review.

HSBC has cut $600m from its travel, entertainment and marketing budget over the course of last year, as grounded bankers have instead conducted multi-billion dollar deals over Zoom and other video conferencing platforms.

READ Mood lighting, showers and lots of masks — The post-Covid City office is coming

HSBC is in the midst of a huge cost-cutting programme that will see 35,000 job losses and a reduction of annual expenses to $31bn by 2022.

Banks that are undertaking big transformations have seized on potential cost-savings presented by the Covid-19 pandemic. Deutsche Bank, which is cutting around 18,000 job as part of its overhaul, is also cutting travel costs and has said it would increase its plans to reduce its real estate footprint by 25%.

Big Four audit firm KPMG has also said it is “probable” that it will cut office space as part of its WFH plans.

Some banks have already permanently changed the way their employees work. Standard Chartered is giving 80,000 employees – or around 90% of its workforce – the chance to work away from the office for some of the time, while Societe Generale is considering offering some of its UK workforce the chance to spend up to 90% of their working week away from the office.

Separately, Hinshaw said that HSBC’s finance function could shrink drastically as the bank automates more processes. He said that this employee base of around 7,000 people could fall by around a third, as it migrates to digital solutions in the division, amid a broader cost-cutting programme across its back office. Automation will also result in less need for a “vast operations function” in the bank, where it has around 75,000 employees.

To contact the author of this story with feedback or news, email Paul Clarke

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