It's 'too early' for HSBC to deepen cuts, says CEO
Despite sluggish financial markets, HSBC Holdings Plc is not in favor to deepen cuts at its securities unit. The company plans to trim costs by $5 billion by 2017. Global investment banks including HSBC are facing turbulent situation amid tougher capital requirements.
Investors are raising questions about whether HSBC will slash costs further at the Global Banking and Markets division. HSBC's Chief Executive Officer (CEO) Stuart Gulliver said during a conference call that "It's too early. We haven't finished the second month of the year. We need to see whether this trend deepens and if it does then we'll respond at the half year."
The London-based banking major HSBC Holdings Plc is in the process of slashing 25,000 jobs to enhance profitability. Gulliver is keen on shrinking operations at investment bank including bonds and stock-trading operations. He aims at bringing down costs by $5 billion during June 2015 to December 2017, as reported by Bloomberg. The Chinese economy slowdown is making the situation in global markets further worse.
Investment banks globally are suffering from stringent capital requirements in the wake of fall in trading revenues. The securities unit of Deutsche Bank AG posted losses for the fourth quarter of 2015. Credit Suisse Group AG also suffered a 35 percent drop in revenues. The lost was more prominent at units engaged in trading, advisory and underwriting business outside of Switzerland and Asia.
Yielding to increased pressure from investors, HSBC has also slashed pay, pension payments to top executives by about 40 percent. HSBC lowered pensions to 30 percent of salaries, according to Financial Times. HSBC was paying cash allowance instead of pension. This payout rose to half of salaries in 2015. Investors started complaining that it was higher when compared to rivals. Subsequently, HSBC decreased pension payout.
Samir Assaf is the head of investment bank at HSBC. It posted a pretax profit of $1 billion as against the loss of $85 million a year earlier. The pretax profit was 33 percent less than the forecast made by Citigroup Inc. Gulliver said they are committed to take out a very large chunk of our cost base. HSBC has decided to freeze hiring in 2016.
HSBC is not curbing plans to shift Middle East business from Channel Island of Jersey to the Emirate in 2016. The European banking major will moved to its new $250 million building in Downtown Dubai as it'll be regional headquarters. HSBC's headcount in the UAE is at 4,000 and across Middle East region, it would be 8,000, as published by The National.
Risk-weighted assets fell 15 percent to $440.6 billion and operating expenses eased to $2.4 billion from $3.3 billion. Revenues for whole 2015 rose 4.7 percent to $18 billion. Sales related to trading equities and interest rates and currencies rose during the year.