HSBC Holdings said on Tuesday it would shed $100 billion in assets, slashing the size of its investment bank and revamping its U.S. and European businesses - in a drastic overhaul that will mean 35,000 jobs cut over three years.
The bank, which has long underperformed rivals, is seeking to become leaner and more competitive as it tries to grapple with a swathe of challenges: slowing growth in its major markets, the coronavirus epidemic, Britain's withdrawal from the European Union as well as lower central bank interest rates.
"The totality of this program is that our headcount is likely to go from 235,000 to closer to 200,000 over the next three years," Noel Quinn, interim chief executive, told Reuters. Some of that will be managed through natural attrition as people leave the bank, he said.
In announcing the restructuring, Quinn is auditioning for the permanent role of CEO, which the bank said in August would be announced within six to 12 months.
Europe's biggest bank by assets, which makes the bulk of its revenue in Asia, said profit before tax tumbled by a third to $13.35 billion in 2019, far below the average estimate of $20.03 billion from brokerages.
That was due to $7.3 billion in write-offs linked to its global banking and markets and commercial banking business units in Europe.
In the United States, 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.
Seeking to simplify the group's structure, HSBC said it would combine its retail banking and wealth management business unit with global private banking operations to create one of the world's largest wealth management businesses.
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.
Although it will reinvest some of the money gained from downsizing, it plans to have a reduced adjusted cost base of $31 billion or below in 2022, underpinned by a new cost reduction plan of $4.5 billion.
The return of tangible equity (RoTE), a key profitability measure, is expected to be in the range of 10% to 12% in 2022. The bank reported a RoTE of 8.4% for last year, down from 8.6% in 2018.
HSBC said the ongoing coronavirus epidemic had significantly impacted its staff and customers, and the outbreak could in the long run reduce its revenue and cause bad loans to rise as supply chains are disrupted.
"Longer term, it is also possible that we may see revenue reductions from lower lending and transaction volumes, and further credit losses stemming from disruption to customer supply chains," Quinn said.
The number of new coronavirus infections in mainland China fell below 2,000 on Tuesday for the first time since January, although global experts said it is still too early to say the outbreak is being contained.