Preparations are at an “advanced stage” for HSBC, one of the world’s biggest lenders, to try again to bolt together its commercial banking division with its global banking and markets unit. The revamp could lead to hundreds of job losses in senior ranks, says Patrick Hosking in The Times.
While HSBC attempted a partial merger of the two divisions in 2020, it had to abandon the effort because of Covid. However, as its shares have greatly lagged its peers in the past nine months, it will restart the plans in the hope of saving up to $300 million. The move may help placate those who have grown frustrated with what they see as the “slow pace of cuts”, says Lex in the Financial Times. It also makes sense to focus on senior management as “that’s where the costs are”.
But the hoped-for $300 million in savings will amount to 1% of the total $32 billion in costs the bank reported last year. This is because a lot of the back-office functions are already consolidated between the two units. To put this into context, costs soared by 12% in the commercial banking division in the first half of this year.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
HSBC clearly suffers from “duplication across its different bits”, says Liam Proud for Breakingviews. Still, the merged entity would be opaque – investors could find it difficult “to get their heads around” the performance of a unit that offers everything from small-company banking to underwriting giant debt and equity offerings for multinationals.
A key task for HSBC
In any case, new CEO Georges Elhedery has a “much bigger job” than finding the “modest savings” he is reported to be eyeing up. A key task will be to find a way to grow the bank to make up for the loss in income from declining interest rates. Net interest income (the difference between what the bank makes from lending and what it pays out on savings) is projected to fall 7% this year and 2% next.
This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.
-
What will the unravelling of US-China trade mean for the economy?What will a US-China decoupling mean for the global economy?
-
Scottish Mortgage: why we’re turning to private companies and China for exceptional returnsWhen it comes to delivering growth, Scottish Mortgage will stop at no end in its hunt for exceptional long-term returns - this includes China, unicorn companies and sectors such as space exploration
-
Two ways to tap into monopoly profits from airportsMost investors can’t get their hands on airports. Here are two ways you can
-
Fat profits: should you invest in weight-loss drugs?The latest weight-loss treatments could transform public health and the world economy. Should you invest?
-
How investors could profit from Ramsden Holdings' four-part growth strategyRamsdens Holdings offers a diversified set of financial and retail services and a juicy yield, says Dr Michael Tubbs
-
How to invest in the booming insurance marketThe insurance sector is experiencing rapid growth after years of stagnation. Smart investors should buy in now, says Rupert Hargreaves
-
Out of America's shadow: Why Trump's tariff chaos may be good for non-US stocksOpinion Upending global investment and trade could benefit other countries at the expense of the US market, says Cris Sholto Heaton
-
BP's 'long, painful decline' – and why next year could be even tougherOpinion Long-suffering shareholders in oil giant BP have been pushing for change. It won’t come soon enough, says Matthew Lynn
-
Investment trusts tap the profits in exotic and obscure global marketsOpinion Peter Walls, manager of the Unicorn Mastertrust fund, highlights three investment trusts as he shares where he'd put his money
-
Falling revenues and mounting debt spell trouble for Jumia TechnologiesStruggling African e-commerce platform Jumia Technologies looks headed for the exit, says Dr Matthew Partridge.
