HSBC to spend nearly two billion in severance and other charges as it announces bumper profits and significant layoffs
Along with strong profit figures, HSBC’s new chief executive, Georges Elhedery, has unveiled an ambitious cost-cutting strategy aimed at simplifying operations and sharpening the lender’s focus on what it sees as its core markets. As part of his restructuring efforts, Elhedery has set a target to reduce annual expenses by $1.5 billion by the end of next year, with $300 million in savings expected to be achieved within 2025 alone.
The plan, which will see HSBC streamline its business, will not be cheap - it involves severance and other charges amounting to $1.8 billion over the next two years.
The mortgage lending giant, which employs over 211,000 people worldwide, is taking a hard look at staffing costs, with planned cuts reducing them by approximately 8%. However, Elhedery offered assurances that the actual reduction in headcount would be somewhat lower than this percentage suggests, though significant job losses are still expected. This follows a series of layoffs already initiated under his leadership.
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HSBC’s latest financial results show a 6.5% increase in pre-tax profits, reaching $32.3 billion - slightly above analysts’ expectations of $31.7 billion. To reward shareholders, the bank announced a $2 billion share buyback programme and declared a quarterly dividend of 35 cents per share, amounting to an additional $6.4 billion return.
Since stepping into the CEO role in September, Elhedery has moved swiftly to overhaul HSBC’s operations. One of his most notable decisions was to scale back the bank’s investment banking presence outside of Asia and the Middle East. HSBC recently confirmed the closure of its mergers and acquisitions (M&A) advisory and equity capital markets (ECM) businesses in the UK, Europe, and the Americas - a move that will impact jobs in London and New York. The decision signals an acknowledgment that HSBC has struggled to compete at a high level in these regions and will instead channel resources into areas where it holds a stronger competitive advantage.
Michael Roberts, who heads HSBC’s newly created global wholesale banking division, emphasised that while job reductions are inevitable, the restructuring would be conducted as efficiently as possible to minimise disruptions. “We are very much aware that this is distracting and disruptive, so we aim to complete this process as quickly as possible,” he said.
Read more: Leaked HSBC memo shows bank making huge cuts in UK and US to focus on Asia
In addition to winding down parts of its investment banking operations, HSBC has made other strategic shifts. The bank recently shut down Zing, a digital payments app it launched just over a year earlier. It has also undertaken an internal reorganisation, splitting its business into distinct units to better align with its geographic priorities. While this restructuring has led to speculation that HSBC might eventually break up into separate entities, Elhedery has firmly denied any such plans.
HSBC’s long-standing role as a financial bridge between East and West has placed it in a challenging geopolitical position, particularly as tensions between China and Western nations continue to escalate. In 2023, Chinese insurer Ping An, a major HSBC shareholder, unsuccessfully pushed for a break-up of the bank, a proposal that was firmly rejected by HSBC’s board and other investors.
The bank’s cost-cutting measures and restructuring efforts are partly driven by an anticipated shift in economic conditions. While HSBC has benefited from a period of higher interest rates, falling rates could put pressure on future earnings. As part of its new direction, HSBC is integrating its commercial and institutional banking divisions while also forming a dedicated international wealth and premier banking unit.
Read more: HSBC announces senior redundancies 'at pace' – and good profits
Despite these structural changes, HSBC is maintaining its presence in certain areas of investment banking, particularly in debt capital markets, leveraged finance, and infrastructure finance - sectors where it sees a competitive advantage. However, its withdrawal from ECM and M&A in the West is a significant setback for London’s reputation as a hub for equity capital markets, as HSBC is a key broker for numerous UK-listed companies. Firms such as easyJet, Boohoo, and Pets at Home will now need to seek alternative financial advisers.
The restructuring follows HSBC’s acquisition of Silicon Valley Bank UK in 2023, which initially suggested an expanded focus on technology-driven investment banking. However, its retreat from ECM and M&A services casts doubt on those ambitions. Instead, HSBC is concentrating on strengthening its footprint in Asia, where the bulk of its profits are generated and where it sees the greatest opportunities for growth.
As HSBC pushes forward with its transformation, the bank aims to position itself as a more agile and efficient institution, capable of navigating an increasingly volatile global economy. While the transition is expected to deliver substantial cost savings, it also comes with considerable consequences, particularly for its workforce in Western markets.
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