The largest of Hong Kong three currency- issuing bank HSBC decided to cut its plans as much as 35,000 jobs to reduce the costs by additional 4.5 billion US dollars and shrink its investment bank and revamp its US and European Business in a drastic overhaul by interim Chief Executive Noel Quinn. The main reason for this is the company’s profits for three consecutive years. The bank says it will also reduce its bank’s business scope in Europe and America.
The bank is facing a number of uncertainties in the wake of the US-China trade war, Britain’s exit from the European Union and the Corona virus outbreak in China. As such, it is focusing on cutting its operating costs. However, the Asian business of the bank is doing well due to better presence in China. While its US and Europe business performance is disappointing.
HSBC gains most from Asia
The acting CEO of the bank, Noel Quinn has an important responsibility for the transformation of the International Bank. Noel took over as acting CEO after John Flint stepped down in August. HSBC’s business is spread in about 50 countries but it gets the most profit from Asia. India overtakes Britain and France, world’s 5th largest economy
Quinn said that “We believe this plan is right and appropriate at this point in time. “The most important thing is that we address the under performing parts of the business. In addressing that, we create capacity for growth elsewhere.”
Cost cutting by $ 4.5 billion by 2022
The bank says its goal is to reduce costs by $ 4.5 billion by 2022. Restructuring cost is about 6 billion dollars. Most of the cost reduction will go to the European and American investment banking sector. Whereas Asia and Central Asia, where the bank gets the most profit, will have to face tough challenges. Essential medicines including paracetamol are expensive by 40 to 70%, Corona virus can worsen the situation.
HSBC’s adjusted pre-tax profit was 4.3 billion dollars during the quarter. On a net basis, its loss widened to 5.5 billion dollars, swinging from a 1.5 billion dollars profit a year earlier after factoring a goodwill impairment of 7.3 billion dollars associated with its investment bank and commercial unit in Europe and 400 million dollars in restructuring charges. The bottom lines of global banks have been pressured by historically low-interest rates — including negative rates in Europe.