HONG KONG (REUTERS, BLOOMBERG) - HSBC is set to slash about 35,000 of its workforce and shed US$100 billion (S$139 billion) in assets in its most dramatic overhaul yet as it grapples with leaner and more focused rivals, slowing growth in major markets, the coronavirus epidemic, Britain's European Union exit and lower central bank interest rates.
In the latest in a series of revamps since the 2008 financial crisis, HSBC said it would merge its private banking and wealth businesses, axe European stock trading and cut US retail branches as it seeks to remove US$4.5 billion in costs.
Instead, it will accelerate investments in Asia, from where the bank draws the bulk of its profits even as risks from the Hong Kong protests and the coronavirus outbreak persist.
The board is also deciding whether the sweeping revamp announced by interim boss Noel Quinn is enough to secure him the top job permanently.
Quinn said in interviews that staff numbers could drop by 15 per cent within the next three years.
"We are looking at an endgame of closer to 200,000," he said.
The restructuring, one of the largest undertaken by a blue chip lender for more than a decade, will be partly managed through natural attrition as people leave the bank, he added.
HSBC, whose huge Asian operations are headquartered in Hong Kong, said the coronavirus epidemic had significantly impacted staff and customers. In the long run it could reduce revenue and cause bad loans to rise as supply chains are disrupted, Quinn said.
The virus has killed almost 1,900 people, overwhelmingly in mainland China, and infected more than 70,000, while its economic impact is spreading across the globe.
"In one sense, they are doing the things that were obvious and had been called out by many, so it's good," Hugh Young, managing director at Aberdeen Asset Managemement Asia, one of HSBC's 20 largest investors said.
"Getting this done will require a fair amount of work, then we need to see how it settles down. Noel is doing a good job in very difficult circumstances," he added.
Europe's biggest bank by assets, which makes the bulk of its revenue in Asia, said profit before tax tumbled by a third to US$13.35 billion in 2019, far below the average estimate of US$20.03 billion from brokerages.
That was due to US$7.3 billion in write-offs linked to its global banking and markets and commercial banking business units in Europe.
In the US, where the bank has underperformed for years, HSBC said it needed to improve returns and would close around a third of its 224 branches and target only international and wealthier clients.
HSBC, which has bought back some US$6 billion of its own shares since 2016, said it would suspend buybacks for two years in order to pay for the restructuring but would maintain its dividend.
It plans to invest more than US$100 billion in "higher returning areas", resulting in broadly flat assets in value terms over the three years. It also expects to incur restructuring costs of about US$6 billion, the bulk of it in this year and the next.
While strengthening its investment banking capabilities in Asia and the Middle East, the bank will maintain a global investment banking hub in London, reducing its European footprint for the business.
The bank will also reduce its sales and research coverage in European cash equities with a focus on supporting equity capital market transactions, it said, confirming a Reuters report last month regarding pullback from the trading business.
Commenting on the impact of the coronavirus, Chief Financial Officer Ewen Stevenson told Reuters the bank expected additional loan loss provisions in the first quarter.