HSBC to cut costs $2.5 - $3.5 billion in three years
11 May 2011
HSBC Holdings PLC today said it would cut costs, sell businesses and cut retail banking operations in markets where it lacks scale, as new chief executive Stuart Gulliver looks to improve returns with tough regulatory and economic conditions that have acting as a drag on its profit.
According to Gulliver, the bank would review its US credit-cards business and retail network, its remaining footholds there, and focus on emerging markets including Mexico and Brazil to grow retail-banking revenue.
HSBC plans to drastically cut costs by $2.5 billion to $3.5 billion in the next three years. The measures to achieve the cuts include moving technology development to low-cost countries and reducing local and regional office staff.
The bank would also lend more from its deposits, aiming for a maximum ratio of 90 per cent loans to deposits, from the current 79 per cent. According to Gulliver another $4 billion in additional revenue could be brought in by tapping wealthy customers in 18 target markets.
According to HSBC the steps would help the lender meet its previously stated targets of a 12 per cent to 15 per cent return on equity and a cost-income ratio of 48 per cent to 52 per cent. The measures come in the wake of HSBC posting lacklustre first-quarter results Monday that revealed increasing costs and flat revenue.
Gulliver, 52, who became chief executive officer in January, said this week it might take as long as three years to achieve the cost reduction targets, which are the highest among its UK peers.
