HONG KONG -- As the coronavirus pandemic puts pressure on its loan portfolio and profits, HSBC Holdings has revived plans to cut about 35,000 jobs worldwide that it had put on hold in March.
"The reality is that the measures and the change we announced in February are even more necessary today," CEO Noel Quinn said in a staff memo on Wednesday. "We could not pause the job losses indefinitely -- it was always a question of 'not if, but when.'"
The cuts, to be paced over three years, are to come heaviest in the bank's U.S. and European operations as part of a renewed focus on Asia. HSBC earns 40% of its revenue and more than 60% of its profits from Hong Kong and mainland China alone.
Quinn in February unveiled the overhaul of the London-based bank, with such steps as cutting $4.5 billion in costs and slashing $100 billion of risk weighted assets by the end of 2022. A little over a month later, he paused the plan citing the "extraordinary impact" of the coronavirus and said the bank would revive the plan once the pandemic passed.
The bank has pressed ahead with some parts of the overhaul plan since February, the CEO told staff Wednesday, without elaborating.
In April, HSBC reported a 49% drop in first-quarter net profit to $2.51 billion compared with a year earlier as it set aside $3 billion for potential loan losses amid the darkening economic outlook. That compared with $2.8 billion in provisions for all of 2019.
The bank warned then that it could have to set aside as much as $11 billion in 2020 if activity in its markets failed to revive.
The main part of the overhaul involves cutting investment banking unit assets by around 35% in Europe and 45% in the U.S on a risk-adjusted basis. Sales, trading and equity research operations will be shrunk in Europe, and the structured products unit will be moved from London to Asia. The freed-up capital will be deployed in higher-growth areas, especially Asia.
While HSBC counts on Asia for more than 95% of its profits, about 45% of its capital still backs assets deployed in the U.S. and Europe. Asia accounts for just over 40% of the risk-weighted assets. The bank, which this month came out in support of Beijing's national security law for Hong Kong despite opposition from the U.K. government, is pivoting to Asia for growth.
Back in February, Quinn said the bank would create more global banking and markets role in Hong Kong and deploy more of its sector and product specialist in the city. The public backing while hitting a raw nerve in Hong Kong over the mainland's growing control, has also elicited a sense of understanding among the bank's rank and file with staff taking a tolerant view amid grim economic realities and looming job cuts.
HSBC shares in Hong Kong have dropped 30% since the start of March, compared with a 6% decline for the benchmark Hang Seng index. Analysts on average expect the bank to post a pretax profit of $10.71 billion for 2020 against $13.35 billion last year.