Mass lay-offs push HSBC cost savings to $2bn
HSBC beat expectations after cracking down on its cost base in the first quarter of this year, laying off thousands to bring its overall job cuts to 14,000 while keeping its revenues steady.
Excluding the effect of an accounting loss on its debt, the bank’s underlying pre-tax profits rose from $5.5bn in early 2011 to $6.8bn this year.
Much of the gain was on the back of a sharp rise in profits at its commercial bank, which HSBC says is the heart of its business. This arm’s pre-tax profits rose from $1.9bn to $2.2bn, and chief executive Stuart Gulliver said that the bank is looking to expand to fill the vacuum left by shrinking lenders, particularly in small business trade finance, which has been hit hard by capital rules.
Unlike some of its UK rivals, the bank is looking to expand its British loan book. It grew loans to European retail customers from $166bn to $173bn, mostly due to an expanding mortgage book.
For the group, total quarterly revenues and costs were flat at $20.4bn and $10.4bn respectively, but the bank said that its annualised savings had now reached $2bn and that its cost-to-income ratio was down from 58.7 per cent to 55.5 per cent.
That is still well above its 2013 target of 48-52 per cent but after being pressed by analysts, chief executive Stuart Gulliver insisted that the goal is achievable.
He emphasised that HSBC has a $1.5 trillion stock of customer deposits currently generating little return due to being held in low-interest rate jurisdictions, saying: “At some point in time, interest rates will be higher in the UK and US.”
The bank has also ditched 11 businesses since last year, when it promised to overhaul the entire group to tackle ballooning costs and new regulatory demands.