Restructures, global splits and continuing job cuts at giant bank
HSBC’s newly appointed CEO, Georges Elhedery, is wasting no time in reshaping the bank’s structure, with plans to streamline operations and reduce senior management roles. Speaking after the release of the bank’s third-quarter results, Elhedery emphasized the need for efficiency but dismissed speculation about a potential break-up of the global financial institution.
Elhedery outlined the restructuring as a move to eliminate overlapping governance within HSBC’s various divisions. “This reorganization is about removing redundancies, not preparing for a break-up,” he assured. His announcement came as the bank posted better-than-expected pre-tax profits of $8.5 billion for the September quarter, outperforming analysts’ forecasts of $7.7 billion. Despite a $1.6 billion drop in net interest income, the bank credited strong performances in wealth management, personal banking, and investment services for its success.
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As part of the reorganization, Elhedery plans to merge HSBC’s commercial banking operations with its global banking and markets division, aiming to cut costs by up to $300 million. Insiders suggest that this consolidation will streamline leadership by targeting the most expensive management layers. Potential changes could include appointing Surendra Rosha, co-CEO of HSBC’s Asia-Pacific operations, to lead the combined division, while Patrick George, the head of markets, may take charge of the bank’s trading operations.
These structural changes align with broader trends in the banking industry, as lenders grapple with shrinking profit margins caused by falling interest rates. Banks like Barclays and NatWest have recently reported strong third-quarter results, but like HSBC, they are also focusing on efficiency measures. Elhedery emphasized that the upcoming merger would make the bank more nimble, ensuring it can respond effectively to customer needs across 62 countries.
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HSBC’s strong third-quarter results enabled it to announce a new $3 billion share buyback alongside a dividend of 10 cents per share. However, the bank remains cautious, acknowledging challenges posed by declining interest rates and geopolitical tensions. “Our strategy is delivering, but we must continue to manage our operations efficiently,” Elhedery noted. The CEO refrained from commenting on the potential impact of the UK’s upcoming budget but expressed optimism about the government’s focus on growth and investment.
HSBC’s restructuring also includes a focus on automation and digital efficiency. Like other major lenders, HSBC aims to reduce travel and operational expenses by implementing stricter policies. Employees have been advised to schedule multiple meetings before booking work-related travel, reflecting an emphasis on cost management. Elhedery explained: “Our priority is to spend wisely, not just to spend less.”
Elhedery’s approach follows the footsteps of other banks like Standard Chartered, which launched a $1.5 billion cost-saving initiative, and Lloyds, which has, among other things, restricted premium travel options. The goal is to offset the effects of rate cuts that could undermine profitability in the coming quarters.
HSBC’s reorganization comes at a time of significant economic uncertainty. The potential for a US-led increase in tariffs—should Donald Trump return to office—threatens global trade, on which HSBC depends heavily. Additionally, the bank faces geopolitical tensions between China and the West, adding further complexity to its operations.
Despite these challenges, Elhedery’s leadership has been well-received by investors, who view him as capable of steering the bank through turbulent times. Having taken a sabbatical in 2022 to learn Mandarin and reflect on his ambitions, Elhedery returned to HSBC with renewed focus, assuming the role of CEO earlier this year. His long tenure within the bank, including stints in the Middle East and global markets, has equipped him to address both operational and geopolitical hurdles.
Elhedery is confident that the benefits of HSBC’s reorganization will be evident within months. “We’ve already started implementing the new structure,” he said, promising more details during the bank’s full-year results in February. Analysts predict the ongoing restructuring could eventually yield savings well beyond the initial $300 million, with some estimating a target of up to $2 billion in reduced costs.
The changes are also expected to result in job cuts as HSBC continues its decade-long trend of downsizing. Under former CEO Noel Quinn, the bank shed 50,000 jobs, and further reductions may follow as Elhedery refines the organizational structure to enhance efficiency.
