HSBC to shutter some investment banking units in Europe, US
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HSBC is set to withdraw from providing equity capital markets and advisory services outside of its core operations.
PHOTO: REUTERS
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HONG KONG – HSBC Holdings will wind down some of its investment banking operations in Europe, Britain and the Americas as part of chief executive Georges Elhedery’s ongoing restructuring.
Europe’s largest banking group is set to withdraw from providing equity capital markets and advisory services outside of its core operations in Asia and the Middle East over the coming months, according to a memo seen by Bloomberg News.
The lender told its staff that it would begin speaking to clients over the coming days about the closing of its investment banking businesses in the West, and that it would complete any live deals and mandates, according to the memo.
“We will retain more focused M&A (mergers and acquisitions) and equity capital markets capabilities in Asia and the Middle East, and we will look to wind down those activities in Europe, the UK and the Americas,” the company said in the memo.
The bank, however, will complete any live deals and mandates, the memo said.
HSBC will offer special incentives to keep those staff motivated, as those roles will end once the current work is wrapped up, a person familiar with the situation said, asking not to be identified discussing private information.
Since taking the helm in September, Mr Elhedery has kicked off a sweeping revamp of HSBC, arguing a new structure would make the company more competitive.
He has already announced the merger of commercial and investment banking outside of Hong Kong and Britain, and eliminated layers of senior management.
With his latest move, Mr Elhedery is taking the axe to a part of his business that has long faced scrutiny from investors because of its struggle to gain market share over the years. While HSBC is one of the largest lenders in the West, it is not often corporate clients’ first port of call for their investment banking needs.
“Going forward we will focus on areas where we can best serve our corporate and institutional clients,” said Mr Michael Roberts, who heads the corporate and institutional banking division.
“We will move to a more competitive, scalable, financing-led model in investment banking, building on our expertise in activities such as debt capital markets, strategic equity finance and leveraged and acquisition finance,” he said.
HSBC lacks the scale in New York, London or continental Europe to compete against Wall Street giants, and the move is aimed at focusing on areas where they can vie for business, the person said.
The lender will continue to offer debt underwriting and leveraged acquisition finance, according to the memo. Those businesses will be complemented by the firm’s corporate risk solutions and strategic equity and financing divisions.
There will be little impact on global market operations and Innovation Banking, the person said.
A spokeswoman for HSBC declined to comment beyond the contents of the memo.
Smaller bonuses, disappointing payouts
Several top executives, including Mr Nuno Matos – who ran wealth and personal banking and was Mr Elhedery’s main rival for the CEO role – have exited amid his restructuring of the bank.
Some employees in areas such as the corporate and institutional banking arm have been warned to expect lower bonuses in 2025, while internal guidance so far is that the payouts are likely to disappoint in the coming weeks.
Final numbers for job losses have not been decided yet, and some staff will be redeployed to Asia and the Middle East where they will be bolstering their position as a main player, the person said.
Executives hope the revamp will help them shave off at least US$3 billion (S$4 billion) in expenses. That would represent a roughly 10 per cent cut in the bank’s expense bill, which is estimated to be around US$32.6 billion for the year.
Bloomberg Intelligence analysts have said the cost-cutting could be “dialled up” to provide a greater boost to profits. In particular, the analysts expect to see more cuts to the bank’s US$19 billion annual wage bill, which makes up the bulk of its expenses. BLOOMBERG
