From Bad to Worse: HSBC Is the Latest Major Bank Reportedly Planning Sweeping Job Cuts

October 7, 2019, 2:30 PM UTC

Global banking giant HSBC plans to axe up to 10,000 jobs in a cost-cutting drive as it grapples with falling interest rates, Brexit and the U.S.-China trade war, reports said on Monday, joining a list of big banks that have announced sweeping job cuts in recent months.

Reached by Fortune, the UK-based, Asia-focused bank declined comment on the reported cuts. The Financial Times first reported HSBC would slash about 4% of its global workforce of around 235,000.

The layoffs, which could be announced with third-quarter results on Oct. 28, are part of broader restructuring efforts being worked on by Noel Quinn, who took over as interim CEO in August when predecessor John Flint departed after just 18 months in the job.

It is part of a new wave of deep job cuts hitting the banking industry, which has also been affected by weak investment bank revenues, low economic growth in Europe and negative interest rates across much of the Eurozone. Add it up, and the banks are finding it increasingly hard to make a decent lending margin.

Deutsche Bank unveiled plans in July to cut 18,000 staff as part of a deep restructuring while France’s third biggest bank Societe Generale has announced 1,600 job losses. Germany’s Commerzbank also plans to shed thousands of jobs.

Europe looks likely to bear the brunt of the cuts at HSBC, which is the only UK-based bank to rank in the world’s top 10 by Tier-1 capital requirement.

HSBC’s European operations made a pre-tax loss in 2018, according to the group’s annual report. Asia, meanwhile, brought in nearly 90 percent of HSBC’s $19.9 billion pre-tax profit.

“There’s some very hard modelling going on. We are asking why we have so many people in Europe when we’ve got double-digit returns in parts of Asia,” one of the sources quoted by the FT said.

Analysts at Jefferies, which has a hold rating on the stock, said, “cutting heads should just be the tip of the iceberg.”

“That the headcount reduction appears to major on Europe should come as no surprise as this is where the inefficiency versus peers is in our view,” Jefferies said in a note to clients that it shared on Monday with Fortune. HSBC faced deteriorating fundamentals, it continued, that were set to put pressure on the estimated 2020 revenue base of $57 billion, “so every penny of savings is necessary.”

“However, HSBC may want to look more seriously at divesting its U.S. retail and commercial banking business as a more radical streamlining solution,” it said.

HSBC announced in August that Flint was stepping down as CEO “by mutual agreement with the board” amid reports of board dissatisfaction at the slow pace of change in the bank.

“In the increasingly complex and challenging global environment in which the bank operates, the board believes a change is needed to meet the challenges that we face and to capture the very significant opportunities before us,” Chairman Mark Tucker said at the time.

The bank said in August that up to 2%, or around 4,700, staff would lose their jobs this year and the FT report said the new cuts would be on top of that. The bank previously announced plans in 2015 to cut 50,000 jobs and shrink its investment bank.

HSBC opened for business in Hong Kong in 1865, helping to finance trade between Europe and Asia. That relationship has remained a central part of its business as it has grown to serve more than 40 million customers in 65 countries.

HSBC, short for Hongkong and Shanghai Banking Corporation, moved to London in 1993 when it bought Midland Bank. After a 2016 review, it decided to keep its headquarters in Britain, deciding against moving back to Hong Kong.

The U.K. has faced deep business uncertainty since Britons voted in 2016 to leave the European Union while Hong Kong has been rocked by months of anti-government demonstrations. Meanwhile, the escalating trade war between the United States and China threatens to weaken trade as investment flows between China and the West, which are crucial to HSBC’s business, come under pressure.

More must-read stories from Fortune:

—How the man who nailed Madoff got GE wrong
—What’s the difference between a recession and a depression? Here’s what history tells us
Charles Schwab on the lessons he’s learned over a lifetime of investing
Why the repo market is such a big deal—and why its $400 billion bailout is so unnerving
Wells Fargo’s new CEO spent 25 years learning from Jamie Dimon—now he’s taking him on
Don’t miss the daily Term Sheet, Fortune’s newsletter on deals and dealmakers.

Read More

CryptocurrencyInvestingBanksReal Estate