HSBC targets senior bankers in cost-cutting plan | USAEMALL.com

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HSBC chief executive Georges Elhedery plans to target the lender’s expensive layer of senior bankers in a cost-cutting restructure that will aim to save as much as $300mn, according to people familiar with the matter.

Elhedery is drawing up plans to merge HSBC’s commercial banking unit with its global banking and markets unit in his first big step to cut costs since taking the job last month. 

Staff have not been given details of the plans, but preparations are at an advanced stage, with an announcement expected by the end of October. The targeted savings could change as the bank’s strategists work through the numbers.

“[The merger] will reduce the top management layers,” said one of the people familiar with the draft plans. “It’s going to affect the senior people and some of the larger roles . . . That’s the most expensive layer and that’s where the costs are.” 

HSBC has benefited hugely from higher interest rates in recent years but is now facing the possibility of lower profits as rates fall. The restructuring will aim to eliminate duplication in the top ranks of the 214,000-employee bank.  

One option being considered is to put Surendra Rosha, co-chief executive of the bank’s Asia-Pacific business, in charge of commercial and global banking and Patrick George, global head of markets and securities services, in charge of the markets business, two people with knowledge of the matter said. Rosha joined the bank as a graduate trainee in 1991 and was previously chief executive of its India business.

Commercial banking head Barry O’Byrne has moved to run HSBC’s wealth and personal banking unit and no permanent replacement has been appointed. Greg Guyett has led global banking and markets since October 2022. 

Though the move marks a potentially disruptive restructuring, the hoped-for $300mn in savings would amount to just 1 per cent of the total $32bn in costs that the bank reported last year.

“A lot of the back-office functions are already consolidated” between the two units, a second person close to the bank said. “Where it will hit is the duplicate management layers. In a country, there’s the head of the [commercial bank] and the investment bank, and going forward they will only need one.” 

HSBC is also looking for a new chief financial officer to replace Elhedery, who took over from Noel Quinn as chief executive in September. Pam Kaur, currently chief risk and compliance officer, was the frontrunner, said two people with knowledge of the process. 

The merger may ultimately be just one part of Elhedery’s cost-cutting plan, since some in HSBC’s leadership had grown frustrated with what they saw as the slow pace of cuts to central functions in London before Elhedery took the top role.

Costs in both units have increased. They were up 12 per cent to $3.9bn in the commercial banking division — which includes lending to small and medium-sized businesses, trade finance and payments services — in the first half of this year.

In its global banking and markets unit, which includes investment banking, markets services and other services for multinational corporations, costs were up 3 per cent to $4.9bn in the same period. HSBC has three revenue-generating units in total, with wealth and personal banking making up the third.

Investment banking accounted for just 6 per cent of the total global banking and markets unit’s revenue in the first half of this year, or 1.5 per cent of HSBC’s $37.3bn total global revenue for the period, according to the bank’s half-year report.

HSBC has previously tried to make savings by partially combining the two units. In early 2020, as part of an overhaul that included downsizing its US and European operations, it said it would merge the back and middle office sections of its investment banking and commercial banking units. But plans were paused when the scale of the Covid-19 pandemic became clear. 

The divisional restructuring is weighing on morale within the units as executives await their fate, three people with knowledge of the bank and its operations said.

HSBC’s commercial bank is seen internally as vital to its operations, whereas in the smaller investment banking business it struggles to compete with rivals such as JPMorgan and Goldman Sachs. The investment bank has a relatively strong presence in important markets in the Middle East, however.

HSBC declined to comment.