HSBC ramps up cost-savings and says overhaul is on target
HSBC said yesterday that it has already achieved $2bn in annualised cost-savings and that it is likely to get the figure up to $3.5bn once its three-year overhaul is complete.
It also said that it has reduced its payroll by 14,000. And its disposal or wind-down of 28 unwanted businesses has bagged the bank $5.9bn and will eventually reduce its headcount by 15,000 staff.
More importantly, the deals have also allowed the bank to free up $55bn in risk-weighted assets, meaning it can redeploy the capital it had held against possible losses from those assets.
The bank did not reveal many new targets, disappointing some analysts, but stuck to its 48-52 per cent cost-to-income ratio, which is widely seen as unrealistic.
Credit Suisse analysts said they don’t expect the bank to achieve that target because: “We don’t expect interest rates to go up that soon; we need full delivery of revenue growth targets; cost inflation is not reflected; and there is no investment spend assumed.”
Chief executive Stuart Gulliver said: “We will continue to simplify HSBC, enabling us to integrate systems and operate to high global standards internationally.”
The bank also reiterated that it expects to achieve a return on equity of 12-15 per cent “in the medium term”, versus 10.9 per cent last year.
And it outlined how it shares out the proceeds of its activities, saying that half is retained for capital or investing, 35 per cent is paid out as dividends and 15 per cent is allocated to bonuses, which it said was a “considered level”. The total pay bill will be a much larger proportion, however, since it would also include base salaries.
The bank also plans to cut down IT costs from 14 per cent of its expenses to 12 per cent in part by moving some technology centres offshore.