HSBC is expected to stop almost all of its UK corporate broking business and potentially cut more areas of investment banking as part of the latest leg of a strategic plan to be unveiled today, which could see 17,000 or more jobs axed, according to a report by International Financing Review (IFR).
HSBC announced two weeks ago that it would quit M&A advisory and Equity Capital Market (ECM) activities in the UK, the rest of Europe and the Americas as part of a major retrenchment in its investment bank by CEO Georges Elhedery.
The news came as a shock to staff, and no more details have been given since. It would be near impossible for HSBC to continue in UK corporate broking without the M&A and ECM businesses, several bankers outside the firm said.
Corporate broking is a unique and lucrative part of investment banking in the UK, and HSBC was corporate broker to 20 of the biggest 350 publicly listed firms in the UK, including six in the FTSE 100, according to Adviser Rankings data for November.
The future of other areas, including equities trading, research and industry coverage is also up in the air, the industry sources said. HSBC previously told staff the pull-back in M&A and ECM is part of a full review of its investment banking business, where the bank is effectively giving up on a 22-year attempt to be a top global investment bank.
It is a leading debt capital markets and loans house and will maintain its global footprint there, and also plans to continue with M&A and ECM in Asia and the Middle East, where the bank has been shifting its focus for years.
However, some Asia-based investment bankers are concerned that the pull-back in M&A and ECM in the West will have significant knockon effects in the region, affecting their ability to get new clients who would have otherwise considered the bank for its global reach.
Elhedery has embarked on a major reorganisation and changes in leadership since starting as CEO in September.
He could target more than $3 billion of annual gross cost savings as part of the latest part of the plan, Bloomberg has reported. Most of those savings would come from cutting staff.
“Based on history, we think c60% could come from headcount reduction,” analysts at Barclays said in a note recently.
HSBC’s last major cull of staff was in February 2020, when it announced plans to cut headcount to less than 200,000 from 235,000, but missed that target.
It had 215,180 staff at the end of September. It could cut 17,000 jobs as part of an attempt to save$2.5 billion annually or 22,000 jobs to reach$3.5 billion in savings, the Barclays analysts estimated.
“Without the shock of the pandemic, we think there is scope for HSBC to return to and come in below its original c200k headcount target,” analyst Aman Rakkar said in the note.
“It makes sense to reallocate capital to reducing costs, at the expense of buybacks, in order to future-proof the business in light of stalling revenues.”
