HSBC Resumes Plans To Cut 35,000 Jobs Postponed By Pandemic
HSBC (HSBC) is embarking on plans to slash about 35,000 jobs which it put on ice after the coronavirus outbreak, as Europe’s biggest bank struggles with the impact on its already shrinking profits.
It will also maintain a freeze on almost all external hiring, Chief Executive Noel Quinn said in a memo sent to HSBC’s 235,000 staff worldwide and seen by Reuters.
“We could not pause the job losses indefinitely - it was always a question of ‘not if, but when’,” Quinn said, adding that the measures first announced in February were “even more necessary today”.
An HSBC spokeswoman confirmed the contents of the memo to Reuters.
HSBC had delayed the job cuts, part of a wider restructuring to cut $4.5 billion (£3.5 billion) in costs, in March saying the extraordinary circumstances meant it would be wrong to push staff out.
However, Quinn said it now had to resume the program as profits fall and economic forecasts point to a challenging time ahead, adding that he had asked senior executives to look at ways to cut more costs in the second half of 2020.
Most of the job cuts are likely in the back office at Global Banking and Markets (GBM), which houses HSBC’s investment banking and trading, according to the Reuters report. The cuts will also affect senior bankers in Britain who work in GBM and HSBC’s head office, as well as support staff in its businesses around the world.
The resumption of job cuts is unlikely to affect the timing or size of dividends HSBC may pay in the future, with that decision likely to be dependent more on the economic outlook for next year and beyond, assuming regulators approve shareholder payouts once more.
Shares in HSBC have been on a downward trend since the beginning of the year and have lost about 28% of their value since the pandemic outbreak in March. The stock rose 1.3% to $24.14 at the close on Tuesday.
Merrill Lynch analyst Alastair Ryan cut the stock’s rating to Hold from Buy, saying that the global lockdown could impact the bank’s earnings enough to mean two years of an uncovered dividend with a likely dividend cut lying ahead.
Still looking beyond the pandemic, Ryan provides a cautiously optimistic view saying: “We also take considerable comfort from HSBC’s historically robust underwriting. And once the significant operational dislocation of the lockdowns has passed, we see HSBC delivering on its restructuring, which refocuses the group on its strongest franchises and higher-growth markets.”
In line with Ryan’s rating, the Street has a Hold analyst consensus on the stock. Meanwhile, the $52.76 average price target implies a whopping $119% upside potential in the shares in the coming 12 months. (See HSBC stock analysis on TipRanks).
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