HSBC, a British multinational banking and financial services company headquartered in London, United Kingdom is planning to cut 8,000 jobs there as it tries to reduce costs.
The bank, which has almost 50,000 workers in the UK, will make cuts in two of its branches, retail and investment banking operations.
The cuts won’t happen just in the UK, a total of 25,000 jobs around the world could suffer the same fate. This means that close to ten percent of the bank’s workers will go. The bank will also ‘ringfence’ its UK operations and sell businesses in Turkey and Brazil, it said on Tuesday.
Dominic Hook, national officer with the union Unite, told the bank to do the cuts in an organized way, because they’ve not done this in the past. “It’s really sad that all our members, all the hard work they’ve done to try to get the bank back working properly after all the scandals of the last few years, are going to be paying with their jobs,” he told BBC Radio 4’s Today program.
Business Model and New Areas
The bank has struggled the last four years and started moving away from its original business model. The decision to do that was because of the costs and setbacks the local market was having at the time.
They’re not the only ones, banks all around the world are struggling. Many of them because of the competition. In Brazil, one of HSBC’s first markets, it was outshined by Bradesco and Itau. The bank had no choice but to leave the country and focus on East Asia, mainly China.
Kamal Ahmed, a BBC business editor, said the thousands of job cuts in the UK would come as a surprise to most workers. “Global banking now is a far tougher business than it was pre-the financial crisis. It is hard to get profits.”
HSBC chief executive Stuart Gulliver is “running a bank that investors believe simply doesn’t make enough money”, he added. Some now say that the British bank is looking to “reduce its footprint in developed economies”.
The surprising cuts come right before a presentation that Mr. Gulliver will give to investors and analysts in his second major strategy plan since taking over the position four years ago. “We recognize that the world has changed and we need to change with it. That is why we are outlining the following… strategic actions that will further transform our organization,” he said in a statement.
The big plan is looking to reduce costs by around $5 billion and increase investments in the areas mentioned above, especially China. “Asia is expected to show high growth and become the centre of global trade over the next decade,” Mr. Gulliver said. “Our actions will allow us to capture expected future growth opportunities.”
Since the news, HSBC’s Hong Kong shares rose almost one percent, but still point down over the last 12 months.
Analysts like James Antos believe that the plan and the cuts will not attract more investors to the bank. “Slaughtering the staff is not necessarily the solution unless management makes the bank considerably less complex,” he said.
HSBC will decide if they move their headquarters out of the UK by the end of this year. Rumors say that the bank might be thinking of moving to Hong Kong.
HSBC has around 6,600 offices in 80 countries and territories across Africa, Asia, Europe, North America and South America, and around 60 million customers. According to numbers released by Forbes in 2012, it was the world’s largest bank in terms of assets. We don’t know the new numbers but if the cuts keep coming, it won’t be first again.