HSBC’s woes can be blamed in part on cyclical factors. Yet that is hardly likely to reassure investors
WHEN NOEL QUINN took over as interim chief executive of HSBC from John Flint, ousted by the board in August, analysts expected a change in style. In contrast to the outgoing boss, seen as a cerebral introvert, Mr Quinn comes across as forthcoming, verging on the blunt.
Yet that is hardly likely to reassure investors. Tom Rayner of Numis Securities, a broker, points out that although some of these trends may be reversed, others, such as Brexit and the trade wars, may linger. Interest rates may well fall further, hurting margins. Investors are not yet pricing in any impact from the protests in Hong Kong, where HSBC is the largest lender. That is too optimistic, says Fahed Kunwar, at Redburn, another broker.
The first prong of this effort will be a renewed drive to pare costs. In August the bank announced a plan to complete 4,700 redundancies by the end of this year. Reports suggests HSBC could seek to cut an additional 8,000 to 10,000 jobs from its total headcount of 238,000 . So hopes must be vested in the second prong of HSBC’s grand reform—to move capital away from the dreariest businesses and towards “higher growth and return opportunities”. Here there seems to be plenty of scope. HSBC’s cost-to-income ratio is 104% in Europe, compared with 43% in Asia, where it generates nearly 90% of its profits. The bank makes only a quarter of its lending in Britain, yet the country generates 35% of its non-performing loans, says Mr Tabbush.
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