HSBC (London Stock Exchange: HSBA-GB) will cut costs by as much as $5 billion within two years, laying off as many as 25,000 staff, the banking behemoth told investors Tuesday in a much-anticipated update.
In a statement to the Hong Kong Stock Exchange, HSBC also said that it would shrink its risk-weighted assets by about $290 billion, including cutting its global banking and markets risk-weighted assets to less than a third of the group's assets.
Europe's largest bank by assets also revealed plans to streamline its 260,000 strong workforce and trim its branch numbers by around 12 percent. The bank said it intended to sell its Turkish and Brazilian operations -- although it will maintain a presence in Brazil to serve large clients -- in what the it called a "significant reshaping of its business portfolio".
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The closures in Brazil and Turkey will result in 25,000 new job cuts, the bank revealed. Since its cost-cutting purge began in 2011, HSBC has cut about 40,000 people from its workforce.
The bank did not give any further information about whether or not it will move its headquarters from the U.K., but HSBC CEO Stuart Gulliver is expected to be asked about this during a conference call, scheduled for 8 am London time.
The bank plans to accelerate its investments in Asia, singling out the Pearl River Delta in Guangdong province, China, and the ASEAN region as particular hotspots. It said it would expand its asset management and insurance businesses in Asia "with the aim of capturing expected opportunities from emerging wealth in the region".
HSBC will now target a return on equity of more than 10 percent by 2017, down from a previous target of 12 percent to 15 percent by 2016.
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"We recognize that the world has changed and we need to change with it. That is why we are outlining the following ten strategic actions that will further transform our organisation," CEO Stuart Gulliver said in the statement.
Included in the bank's list of strategic actions were plans to set up a U.K. ring-fenced bank, and to complete the review into its headquarters by the end of 2015, after the bank threatened to relocate its headquarters from London to Hong Kong earlier this year.
Being based in the U.K., HSBC are forced to pay a bank levy which cost the lender £700 million last year ($1.07 billion). Gulliver has openly criticized the levy, introduced by U.K. chancellor George Osborne in 2010, as well as the requirement to create a ring-fenced U.K. high street arm, citing the measures as the key concerns over remaining headquarters in London.
This is Gulliver's second attempt in just four years at seriously reforming the bank. In the past year HSBC has weathered allegations that its Swiss private bank helped of wealthy clients to evade tax. The 150-year-old financial institution is also is midway through a deferred prosecution agreement with the U.S. over accusations it helped launder money for drug cartels and clients from Iran.
King Lip, chief strategist at Baker Avenue Asset Management, told CNBC that the strategy change was "a start" but was not enough to move the stock.
"The moves to close Brazil and Turkey were pretty much widely expected so a significant catalyst should be something like spinning off the Asian or U.K. businesses, or if they close other divisions that are money-losing like the U.S. and perhaps even Mexico," Lip said.
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