Finance

HSBC plans $6bn in Asia investments as profits slump by 34%

HSBC is sticking to cost-cutting measures that will see it strip out 35,000 jobs and will invest up to $6bn into Asia as profits at the UK lender slumped by more than 30% in 2020.

The bank is investing billions in its Asian wealth management and wholesale business, it said in a presentation accompanying its results, showing a shift in focus away from Europe as it moves key executives away from London.

HSBC’s pre-tax profits of $8.8bn were down by 34%, as provisions for credit losses from Covid-19 weighed the bank. This was better than analysts expected, however, as the $8.8bn in potential loan losses were at the lower end of a previously announced range of $8bn to $13bn.

The bank is pushing asset towards Asia, with $6bn flagged for “growth investment” within its wealth management unit in the region over the next five years, as well as bolstering links between its commercial and investment banking units. However, there was little detail on any expected acceleration of its transformation plan. The bank is instead sticking to its target of reducing risk-weighted assets by $100bn and reducing costs to $31bn by 2022.

Noel Quinn, chief executive of HSBC said in a statement that the bank delivered “solid financial performance in the context of the pandemic – particularly in Asia – and laying firm foundations for our future growth. I am proud of everything our people achieved and grateful for the loyalty of our customers during a very turbulent year.”

HSBC has cut 17% of senior management roles over the past year, slashed the number of contractors it has by 11,000 and reduced headcount in Europe by 6%. In a call with analysts, chief operating officer John Hinshaw said the bank plans to cull to a third of its finance function, which employs around 7,000, through automating processes and signalled deep cuts to its back office functions, which employs 75,000 people. 

READ HSBC shakes up regional bosses amid push to Asia

HSBC was expected to unveil a new “pivot to Asia” strategy, that will see the bank focus more on its biggest markets. It will shift a trio of senior bankers to Hong Kong, with investment bank boss Gregg Guyett, chief executive of commercial banking, Barry O’Byrne and Nuno Matos, who has just been promoted to head of wealth and personal banking all expected to move. It puts leaders of the bank’s three biggest units in the region.

Quinn declined to confirm the names of executives transferring to Asia, saying any decisions are not firmed up, but said it is his “intention to move some of the roles”, particularly front line positions where HSBC employees can be “closer to growth opportunities”.

The bank has come under criticism in recent months for its support of a controversial new security law implemented in Hong Kong by China. The lender has drawn fire from politicians in the UK and US, with Quinn quizzed by MPs in January after HSBC froze the bank accounts of pro-democracy activists. It remains headquartered in the UK, but the move of senior executives shows a gravitational shift towards Asia.

HSBC has long-hinted that it will need to do more to turn around the business. Last month, its chairman Mark Tucker said that the pandemic has created a need to speed up its plans. “Economic realities mean that what we were planning to do in February we need to be even more urgent in doing,” Tucker said.

Within its global banking and markets unit, which houses its investment bank, profits of $4.8bn were down around 7% on the previous year. This was despite a 32% surge in fixed income revenues to $6.3bn, which was in line with sharp increases at rivals. Its equities unit, which has been the target of cuts under its transformation plan, was up by 2% to around $1bn. Revenues in global banking, which houses its traditional investment bank, were largely flat at $3.8bn.

READ HSBC London bankers brace for job cuts amid Asia shift: ‘There is a lot of middle management in the UK’

The bank said the plan for its global banking and markets unit was to “invest to capture trade and capital flows into and across Asia, while connecting global clients to Asia and the Middle East through our international network”.

Ahead of its results, HSBC unveiled a shake-up of its regional leadership, with chief financial officer Ewen Stevenson taking charge of its transformation programme. Colin Bell, the bank’s group chief compliance officer will take over from Matos as CEO of HSBC Europe and its UK ring-fenced bank HSBC Bank Plc. Michael Roberts is now chief executive for the US, Latin America and Canada and Stephen Moss, will relocate to Dubai to become CEO for Middle East, North Africa and Turkey (MENAT).

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

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