August 1st, 2011
12:36 PM GMT
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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.



soundoff (17 Responses)
  1. Greeds

    I don't know if these companies know, but you can't keep trying to make profit on top of last year for the rest of your days. It woud be lovely to see an article one day when a big bank or company are actually dropping prices as their profit is so large anyway. 25,000 people lose their jobs yet they still want to make MORE money than what they already do. It's an absolute disgrace. I think the governments should step in and say, there's a limit too the amount of profit you make (like a % of the company size or something) otherwise they will just end up draining the money out of those countries.

    August 1, 2011 at 1:49 pm |
  2. Martin Smith

    dump the consumer market to focus on the more lucrative corporate banking ummm guys who makes all those corporations their profits once all the consumers no longer have any money. The whole market system is only focused on the next quarterly report and no one is thinking 5 years down the road. I guess every 3 months you just dump the bottom percent of you customers well 10 years from now you will have nothing left.

    August 1, 2011 at 2:31 pm |
  3. lolface

    want ot know why cutting costs is damaging to the economy? 25,000 employees will lose their jobs between now and 2013, that is why less jobs = less taxation = lower economy.

    August 1, 2011 at 4:49 pm |
  4. citznx

    This started out being reported as 25,000 jobs...now it's 30,000 and RISING?

    August 1, 2011 at 6:21 pm |
  5. voiceinthewild

    The earlier posters think they know about economy and business but not really. Business is business, competition is cut throat. You can't expect corporations to make decisions other than profit – if some do it's a nice to have but that's an exception not the rule. There are other institutions of society who help make sure people/businesses 'do the right thing': family, government, education, religion, .... but not business as it is.

    August 1, 2011 at 6:51 pm |
  6. KM

    They will employ 2000 plus people in Asia Pacific and China.. That is the future guys! That is where people have money. It is sad that 25,000 job losses will occur, and it might not be the best strategy. However, not having the worst reputation, HSBC must have thought long and hard before coming to this conclusion. It is an Internatinal bank, and the state of US economy is not that great, hence less banking for consumers-so probably makes sense. Having said that, HSBC is not that well known in the US. I have an HSBC bank not to far from where i live, and i hardly see anyone there .However, when i go to my PNC bank, or Chevy Chase, the lines are full.

    August 1, 2011 at 8:12 pm |
  7. me

    Ahhhhh, another beautiful example of corporate job-creation in action.

    August 1, 2011 at 11:53 pm |
  8. Tom

    Banking must be one of the few industries where laying off 25,000 people is heralded as a good start and boosts the share price. One of the few industries where a 3% rise in profits at the half-year mark results in demands for significant cost-cutting. Then again, we have already seen that banking is one of the few industries that is allowed to gamble away a nation's wealth and yet still be bailed out by the very people they've screwed over. Don't get me wrong, I love money – can't live without it – but the sheer greed that drives this world makes me disappointed in Mankind, sometimes.

    August 2, 2011 at 2:24 am |
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