August 1st, 2011
12:36 PM GMT
Hong Kong, China (CNN) – Cut cost, boost revenue. From global businesses to national governments across Europe and North America, this seems to be the monetary mantra of 2011. For HSBC, one of the world’s largest banks, it’s no different.
Today, HSBC confirmed the first steps of its Great Realignment around the world. To cut costs, an eye-popping 25,000 employees will lose their jobs between now and 2013. To boost revenue, retail banking will be scaled down while more lucrative corporate banking will be scaled up.
Right after the plan was unveiled late Monday in Hong Kong, HSBC’s London share price popped 4.5% in early trade. The company’s better-than-expected first half earnings likely supported that as well. The data, also out today, showed HSBC’s earnings for the six months to June came in at $11.5 billion – 3% up from the first half of 2011 and 45% up from the second half of 2010. Analysts had expected pre-tax profits of $600 million less. The world’s local bank needs more good news like this.
Said HSBC’s Chief Executive Stuart Gulliver of the numbers, “I am pleased with the first set of results which mark the first step in the right direction of what will however be a very long journey”.
No doubt it’s already been a long journey for HSBC year-to-date. Since early January, the company’s share price in Hong Kong has sunk more than 7%. Investors have been worried this is due to less-than-stellar performances in some countries in which HSBC operates. The solution? To scale back in those regions.
The United States is the most recent example. Just last Sunday, HSBC announced it would sell off nearly half of all its U.S. retail branches – mostly in upstate New York – for about $1 billion in cash. HSBC is also withdrawing its retail divisions in Russia and Poland.
At the same time, the focus is turning to faster-growing emerging markets: Mexico and Latin America, Turkey and (surprise, surprise!) China. While HSBC plans massive layoffs elsewhere, it aims to add about 2,000 jobs to its China and Singapore workforces over the next five years. The reason: Hong Kong and the rest of Asia-Pacific produced over half of the group’s profits in the last half of 2010.
To further his point, HSBC’s Gulliver named those countries where he’s pinning his hopes for future profits.
“We remain positive on emerging markets. We anticipate a soft landing in China and expect the risk of overheating in Hong Kong to ease. We expect continued strong growth in the rest of Asia and Latin America. And we remain positive on the outlook for the Middle East.”
Interestingly, he left out mention of North American and European countries that have not been so successful, vaguely adding, “There are clear short-term concerns. The geopolitical and regulatory backdrop is uncertain and presents challenges for the developed economies.”
Few might disagree that the United States, Spain, Portugal, Italy and Greece might be on that ‘unmentioned’ list. As we’ve been talking about for much of the last few months on our airwaves, these countries need to cut their costs and boost their revenue in order to pull themselves out of their own red ink.
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