HSBC Holdings HSBC has resumed plans to cut 35,000 jobs, which was earlier suspended following the coronavirus scare. In an internal memo to the staff, the company’s CEO Noel Quinn said, “We could not pause the job losses indefinitely - it was always a question of 'not if, but when'.”
He further said, “You will have seen that our profits fell in the first quarter, and virtually all economic forecasts point to challenging times ahead.” Hence, the job cuts announced in February has become “even more necessary today.” The company, at the same time, will continue to freeze all external hiring.
The job cuts were part of HSBC’s restructuring plan, which aims to save $4.5 billion (£3.6 billion) expenses by 2022 and shed $100 billion of risk-weighted assets by shrinking the U.S. and European businesses, along with scaling back investment bank operation.
As of Mar 31, 2020, HSBC had 2,35,000 employees on a worldwide basis. While the majority of workforce will be employed or paid for most of 2020, management will likely start making cuts in the second half of the year.
A large portion of the job cuts are likely to be in the back office at the Global Banking and Markets division. Further, some of the cuts are expected to be due to merging of roles in the commercial bank and investment bank units. Also, HSBC will review the less-profitable areas of the business.
During first-quarter 2020 earnings conference call, the company projected profitability in 2020 to be “materially lower” on a year-over-year basis despite cost-cutting efforts. Also, it expects loan losses to be around $11 billion this year, having already set aside $2.4 billion to handle bad loans in the first quarter.
Earlier in April, HSBC along with other major U.K.-based banks including Barclays BCS and Lloyds Banking Group LYG had suspended all types of shareholder distributions for the year, with an aim of enhancing liquidity amid the virus outbreak and subsequent economic slowdown.
Shares of HSBC on NYSE have lost 38.5% over the past six months compared with 32.4% decline of the industry.
Currently, HSBC carries a Zacks Rank #5 (Strong Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Other than HSBC, Deutsche Bank DB has resumed planned job cuts after putting a pause on the same in March amid the coronavirus mayhem. The company’s CEO Christian Sewing in May said, “We decided to further accelerate our cost reduction program.” Last July, it had announced plans to cut 18,000 jobs.
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