HSBC is reviewing its US cards business and streamlining its wealth management and retail banking operations as it eyes savings of up to $3.5bn (£2.1bn), Europe's biggest bank has said.
HSBC said the savings would help it reduce the proportion of revenue spent on expenses to 48-52 per cent by 2013 from 61 per cent in the first quarter, as it battles rivals such as Standard Chartered to keep costs under control.
The extent of HSBC chief executive Stuart Gulliver's task to streamline and revive HSBC was laid bare on Monday, after a jump in costs dragged quarterly profits down some 14 per cent.
"A target of 2013 will give them enough time," said John Wadle, an analyst with Mirae Asset Securities in Hong Kong.
"I think they are going to streamline high-cost income businesses and my personal guess is that the actual cost cutting may result in only about $1-2bn ."
HSBC will now focus its wealth management business to 18 of the most relevant economies, and limit retail banking to markets where it can achieve profitable scale, it said.
Currently, the bank has operations in some 87 markets and employed more than 287,000 people as of June 2010.
HSBC said it would exit retail banking in markets including Russia and grow those operations in places such as Singapore, Mexico, Brazil and Turkey.
The Us card and retail business delivered profit before tax of $306m in the first quarter of this year, down about 15 per cent from a year ago. HSBC could free up to $25bn from selling the credit card operations, analysts at Barclays Capital had estimated before the statement.
The United States has typically been seen by many analysts as a low-return area for the bank, following HSBC's disastrous purchase of the Household mortgage business there before the global financial crisis.
It currently has some $33bn in customer loans and 475 branches there.
"We will increase capital deployment discipline, directing investment to faster growing markets and businesses as we scale back elsewhere," Gulliver said.
The 51-year-old Gulliver was named chief executive in September after a damaging boardroom power struggle, and had been expected to put most immediate attention on the retail arm, especially in the United States.
The bank will also target a dividend payout ratio of 40-60 per cent, while maintaining its return on common equity to 12-15 per cent, the bank said.