HSBC plans to cut 14,000 jobs to save up to $3 bn by 2016

Global banking giant HSBC Holdings Plc said yesterday that the group plans to achieve additional $2 to $3 billion in cost reduction by 2016, in continuation of its strategic plan outlined two years ago.

Stuart GulliverThe massive cost savings plan would include cutting as many as 14,000 more jobs. In April, HSBC said it would slash about 1,150 jobs in Britain, adding to the reduction of 30,000 positions announced two years ago.

In a meeting with investors in London on the group's strategy, HSBC's chief executive Stuart Gulliver said, ''We have transformed HSBC in the first phase of the execution of our strategy.''

Since 2011, HSBC has closed or sold 52 non-strategic or underperforming businesses and achieved $4 billion in cost savings and generated double-digit loan growth in 15 priority markets.

HSBC said that its plan is to expand business and increase dividends. The company also stated that it was considering share buybacks to neutralise the dilutive effect of scrip dividends.

Recent sales include its business in Panama to Bancolombia for $2.1 billion, stake in the Chinese insurer Ping An for $9.4 billion (See: HSBC to sell entire stake in China's Ping An Insurance to Thai group for $9.38 billion). Before that, the company sold its US credit card unit to Capital One Financial Corp and also four Latin American units to Colombia's Banco GNB Sudameris SA.

''HSBC is now simpler, easier to manage and ready to take advantage of growth opportunities,'' Gulliver said.

The global lender expects to achieve additional cost savings by simplifying some of its internal process and systems. The new three-year plan would see the head counts reduce to 240,000 by 2016 from the earlier announced 254,000 as a result of the restructuring.

Future plans include increased focus on commercial banking in Asia and Latin America, besides aiming to gain market share in retail banking and wealth management in the UK and Hong Kong.

Last week, HSBC said that its pre-tax profit nearly doubled to $8.4 billion in the first quarter, beating analyst's forecasts. Revenue increased 14 per cent to $18.4 billion compared to a year ago (See: HSBC profits almost double to $8.43 billion).

''We will continue to exert tight cost discipline whilst streamlining processes and procedures. This enables us to invest in growth and global standards,'' Gulliver said.

HSBC's 22 home and priority markets are expected to account for approximately 58 per cent of addressable total banking revenue growth globally to 2020. Over the next three years the company said it will focus discretionary growth of risk-weighted assets in our priority faster growing markets and commercial banking.

Despite achieving its original cost savings target, HSBC hasn't met its goal to reduce costs as a percentage of income, which has not grown as a result of the eurozone debt crisis, Gulliver said.

The bank aims to achieve cost-efficiency ratio of about 55 per cent in 2014-2016, and a 12-15 per cent target on return on equity (ROE). The ROE was 8.4 per cent last year and 14.9 per cent in the first quarter.

Further, it has kept a common equity Tier 1 ratio target of above 10 per cent, in accordance with the Basel 3 banking norms. The ratio for the first quarter was 9.7 per cent.

"We are confident that these measures will deliver consistent and superior financial results and move us closer to achieving our ambition of being the world's leading international bank," Gulliver said.