HSBC will reduce its worldwide headcount by a further 14,000 over the next three years, chief executive Stuart Gulliver told investors and analysts yesterday. The cuts will help pare costs by another $3 billion in addition to the savings made since 2011 when Gulliver took charge of Europe’s biggest bank.
HSBC has slashed 34,000 jobs during the past three years and at the end of 2012 employed 260,000 staff. This will drop to 254,000 as part of the cuts that have already been announced and is expected to fall to between 240,000 and 250,000 by 2016.
“We will continue to exert tight cost discipline while streamlining processes and procedures,” said Gulliver in London yesterday.
The bank has already achieved annual cost savings of around $4 billion through reduced staffing levels and from asset disposals. It has cut 46,000 jobs worldwide and sold more than 50 businesses, including its stake in Ping An Insurance for $9.4 billion in February. Its risk-weighted assets have fallen to about $95 billion.
However, Gulliver pointed out that although absolute saving targets had been met, sluggish income growth meant that as a proportion of revenue, costs are still too high. The European sovereign debt crisis has hurt profitability.
HSBC has had to revise its costs-to-revenue target to 55% from a range of 48% to 52% during the previous three years. Staff cuts will be made across the bank’s global operations rather than focused on particular regions or divisions. But the bank is still committed to growing its commercial banking businesses in the emerging markets of Asia and Latin America.
HSBC is well capitalised, with shareholder equity of $175 billion and a tier-1 ratio of 10.1%. The bank indicated that it may begin buying back shares in order to achieve a return on equity of 12% to 15%, compared with 8.4% in 2012.
It also plans to increase its dividend by $1 billion this year, maintaining a payout ratio of between 40% and 60%. HSBC is already one of the largest dividend payers in the FTSE 100. The bank’s share price rose about 1% yesterday.
