HSBC’s new chief executive has insisted his redrawing of the bank’s operations between East and West are not a precursor to the kind of break-up demanded by one of its biggest shareholders last year.
Speaking after HSBC’s third-quarter results on Tuesday, Georges Elhedery said the main reason for his overhaul “is to make us a simpler, leaner organisation with faster decision making, stronger empowerment of our frontline people – being able to serve better our customers”.
Elhedery, who took over from Noel Quinn at the start of September, has quickly made his mark at the London-based bank by last week unveiling a major restructuring of its global operations.
From the start of next year, HSBC will split into four new divisions, including a merger of its global commercial and investment banking arms.
HSBC’s new businesses will also be grouped within separate Eastern and Western camps amid increasing geopolitical tensions between China and the West.
“We have simplified our regional governance structure, bringing it from five regions… down to two,” Elhedery told reporters. “And we expect this to make it easier for our customers to deal with us because we will be more empowered and faster at delivering [for] them.”
Splitting the group along geographical lines has been viewed as a partial victory for Chinese insurer Ping An, one of HSBC’s largest shareholders.
It had pushed for the bank to spin off its Asian operations but failed to win the support of other investors at a shareholder vote last year. The new structure has effectively created a standalone Asia business, without the separate stock market listing Ping An had sought.
But Elhedery stressed that his East-West divide would not lay the groundwork for a break-up.
“This is not either a precursor, or an intent, or a preparation for any split,” he said. “The global connectivity is a unique differentiation for us – our customers see us as a major financial institution offering them distinctive capabilities in our global connectivity.”
Asked whether he had spoken with Ping An about the restructuring, Elhedery said the bank routinely engages with all its major shareholders “in the regular course of business”, without commenting on any “specific conversation”.
As one of the biggest foreign-owned financial firms operating in China, HSBC has long navigated controversy surrounding the communist-controlled country.
It came under fire for its support of China’s clampdowns on Hong Kong’s pro-democracy movement in 2020 and has faced allegations of freezing activists’ bank accounts.
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Job cuts
Elhedery is trying to reduce costs and home in on core divisions at Europe’s biggest lender as falling interest rates threaten its margins.
He confirmed on Tuesday that the overhaul is set to involve job cuts among HSBC’s senior bankers.
“There will inveitably be some de-duplication of governance, and therefore there will inevitably be a reduction of senior roles in the organisation – some senior roles in the organisation,” Elhedery said.
“We will be making organisation decisions over the course of the next few months to clarify the outcomes, and we will do so at pace.”
The bank’s precise expectations for job cuts and restructuring charges remain unknown. It intends to provide more details on the revamp alongside its annual results in February.
“Our current analysis shows that we expect net benefits from this exercise, with any upfront costs more than compensated for through a short payback period afterwards,” Elhedery said.
“This is a matter of months, not years. We do expect the payback period to happen in a short timeframe, mostly during the course of 2025.”
He added that HSBC could offload more of its regional businesses as the bank pivots towards Asian markets.
In recent years, the bank has sold operations in Canada, Greece, and French and US retail banking. It expects the sale of its Argentina business to complete later this year.
“We will continue having selective reviews of various areas of our activities – be it markets, geographies, product lines, activities – and assess their relevance to our overall strategy,” Elhedery said.
“And should they not be part of our overall strategy, we would look at disposing of them.”