Exclusive: HSBC to axe senior managers in strategy shift – sources

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© Reuters. FILE PHOTO: HSBC logo is seen on a branch bank in the financial district in New York

By Sumeet Chatterjee and Lawrence White

HONG KONG/LONDON (Reuters) – HSBC (L:) is set to unveil a new round of job cuts targeting senior international managers and reduce its presence in some smaller markets as part of a wider strategy overhaul, people with knowledge of the matter told Reuters.

The changes are expected to be part of a strategy update interim Chief Executive Noel Quinn will unveil on Feb. 18 with a view to boosting the profitability of Europe’s biggest bank by assets in a tough operating environment, the people said.

Quinn’s bid to restructure HSBC comes amid slowing economic growth in its major markets, an outbreak of the fast-spreading coronavirus, Britain’s protracted withdrawal from the European Union, and lower interest rates.

While it was not clear how many jobs would go, the people said the planned move would mainly hit operations in London and to a lesser extent in Asia, which contributes nearly 90% of the bank’s profits.

The review will look at HSBC’s presence in some Latin American markets, the sources said, a region that accounts for just 3% of its pre-tax profit. Apart from Mexico, its presence in other countries in the region such as Argentina is small.

HSBC declined to comment.

The bank’s target to cut costs and simplify its notoriously complicated management setup is expected to focus on slashing a large number of global managerial roles across all business units – from investment to commercial banking, the people said.

The people spoke to Reuters on the condition of anonymity as they were not authorised by the bank to speak with the media.

HSBC has global managers looking after a wide variety of functions for most of the product lines within its business divisions. Those senior managers are backed by a string of administrative and other support staff.

“More than cost-cutting, the idea is to make the structure at the top a bit leaner and give more decision-making powers to the regional managers who are closer to the clients,” said one of the people who is aware of the internal strategy discussions.

After Reuters reported the strategy shift on Wednesday, HSBC said it had appointed Stephen Moss as regional chief executive for Europe, the Middle East, Latin America and Canada, bringing regions previously managed separately under his responsibility.

HSBC also said Nuno Matos would be appointed chief executive of Europe, replacing James Emmett who will leave the bank in September.

‘UPSETTING’ REPORTS

Most of the senior bankers in the firing line will be leaving over the next few weeks, the people said.

HSBC had 237,685 staff at end of June 2019, an increase of 2,468 over the same period a year ago.

Chief Financial Officer Ewen Stevenson said in August the bank would cut about 4,000 jobs in 2019 to reduce costs. It has not yet published figures showing how many jobs went last year.

Analysts expect HSBC to report pre-tax profit for 2019 of about $20 billion on Feb.18, in line with the $19.9 billion profit in 2018.

In an internal email this week, HSBC told its staff there would be reports in the media ahead of its strategy and results announcements which it said could be “upsetting” and that it would not comment on them.

Quinn, who is tipped by HSBC insiders to get the CEO role full-time, talked in October about the need to “remodel” the bank after dropping its profitability target for 2020 altogether and reporting a sharp fall in earnings.

HSBC ousted John Flint as chief executive in August after just 18 months in a shock move the bank’s chairman said was needed to speed up progress on priority areas such as the turnaround of its U.S. business.

While the London-headquartered bank has benefited from billions of dollars of investment in Asia, mainly in China, over the last few years, a sluggish performance in Europe and the United States has weighed on its returns.

In his strategy update, Quinn is likely to unveil plans to boost HSBC’s profit outside Asia – including a review of some of its markets producing only low returns – while reiterating HSBC’s commitment to invest more in China, the sources said.

HSBC is considering pulling out of Turkey and is also seeking to sell or reduce its business in other markets such as Armenia, Greece and Oman where it is struggling to compete with local rivals, Reuters reported last week.