LONDON – HSBC, the big European bank, said Monday that it was cutting 30,000 jobs, as part of a wide-ranging cost-cutting program to improve profitability.
The large-scale cuts, which would represent about 10 percent of HSBC’s work force, are part of the company’s strategy to reduce expenses by $2.5 billion to $3.5 billion over the next two years. The layoffs include 5,000 positions the bank has already started to eliminate this year by closing some businesses.
“They are obviously tackling their pretty poor cost-to-income ratio with the job cuts,” Jane Coffey, head of equities at Royal London Asset Management, said.
HSBC is the latest bank to announce job cuts amid regulatory uncertainty and global economic weakness. Credit Suisse said last week that it planned to eliminate 2,000 positions, or 4 percent of its jobs. Goldman Sachs and Morgan Stanley are also reducing their head counts. (A person with direct knowledge of the HSBC decision put the layoffs at 10,000 on Sunday.)
Dimas Ardian/Bloomberg NewsStuart T. Gulliver, chief of HSBC.The job cuts come as HSBC reported decent earnings in the second quarter. On Monday, the bank said that profit rose 36 percent to $9.2 billion in the first six months of this year, up from $6.7 billion in the same period last year. It set aside $5.3 billion for bad loans and other credit risks, 30 percent less than in the first half of last year.
Stuart T. Gulliver, who took over as HSBC’s chief executive in January, said he was “pleased with these results, which mark a first step in the right direction on what will be a long journey.”
Shares of the British bank rose 4.4 percent in London after the bank reported better-than-expected first-half profit.
Most of the job cuts are focused on the more mature markets, including Europe and the United States. The financial firm closed its retail banking operation in Russia and Poland, shut 66 bank branches in Mexico and sold insurance businesses in Britain, Bermuda and Mexico.
HSBC announced Sunday that it would sell 195 of its branches in upstate New York to the First Niagara Financial Group for about $1 billion. The bank is also in talks with potential buyers for its credit card business in the United States. Mr. Gulliver said. Capital One Financial, said analysts, could be among the suitors.
Despite the retreat in the developed countries, HSBC plans to continue hiring in Asia and Brazil. The bank’s costs rose to 57.5 percent in relation to revenue in the first half, from 50.9 percent a year earlier, partly because a war for talent in Asia pushed up staff costs. Mr. Gulliver said he expected such expense to remain high despite some signs that China’s economy had started to cool.
HSBC’s earnings and share price fared better over the last year than its British competitors, includingBarclays, because the bank generates a large amounts of profit from fast-growing regions, with more than half of earnings coming from Asia.
Gain in commercial and retail banking operations and its wealth management unit more than compensated for a drop at HSBC’s investment banking unit. Pretax profit rose 3 percent to $11.5 billion in the first half from $11.1 billion in the period last year, while earnings at its investment banking unit fell to $4.8 billion from $5.4 billion.
Still, Mr. Gulliver is seeking to reduce costs in light of stricter financial regulation and a difficult economic environment in Britain, its home market, and the rest of Europe. Mr. Gulliver said he expected the economic outlook for Asia and other emerging markets to “remain positive.”
“Growth in the U.S. and Europe is likely to remain sluggish as long as the impact of high debt levels and government budget cuts weigh on economic activity,” he said.
This post has been revised to reflect the following correction:
Correction: August 1, 2011
An earlier version of the story imprecisely described the layoffs. HSBC plans to cut 30,000 jobs through 2013. The bank has previously started to eliminate 5,000 of those positions.
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