As part of its plan to reduce cost by retrenching 30,000
employees by the end of 2013,
HSBC Holdings Plc.
(
HBC
) has announced job cuts in the UK. The company stated that there
would be a reduction of about 3,167 jobs, out of which nearly 950
employees would be redeployed in other departments. This implies an
effective job cut for over 2,200 employees.
Jobs to be Impacted
The employees in HSBC's retail bank, mainly senior and middle
level managers, will bear the brunt of this announcement.
Additionally, quite a few investment advisors will be axed.
However, none of HSBC's 1,250-branch network operations will be
affected by this action.
Reasons for the Downsizing
Though HSBC recorded a profit of $3.5 billion (up nearly 45%
from the prior year) from its UK operations last year, it is
retrenching employees. The main reason behind the reduction of
employees is the company's strategy to revamp its operations for
stabilizing the capital levels and improve efficiency.
In May 2011, HSBC's CEO announced the plans to bring down the
operating expenses by $3.5 million by the end of 2013 through
restructuring and contraction of its global business.
HSBC has been evaluating all of its global businesses while
trying to focus only on profitable and core operations. By 2013,
the company anticipates pushing down its cost efficiency ratio to
52% from 57.2% in 2011.
New banking regulations are also behind the reduction in
headcount. Later in June this year, UK bank regulators are expected
to provide details regarding the new regulation that will lead to
the separation of retail banking activities from other investment
banking operations. This new regulation will likely lead to
stringent rules to be followed while selling risky financial
products to the customers.
This new regulation may result in less number of clients seeking
financial advice from the banks. Hence, HSBC undertook proper
review of its operations. Additionally, to remove multiple layers
of management, it decided on reducing its personnel in UK.
Similar Moves by HSBC Before
Over the last year, HSBC has slashed about 7,000 jobs across the
globe as part of its restructuring effort. In the first part of
restructuring, the company slashed its employees in US, Brazil,
Hong Kong, Mexico and Canada.
The company has also been divesting and closing its businesses
(mostly unprofitable and non-core) in many countries, which has led
to retrenchment of employees. However, at the same time, it has
been recruiting in faster growing markets to improve market share
and financials.
Similar Actions by Other Banks
The job-cut scene has been witnessed in other banks as well.
Since 2008, about 80,000 banking jobs have been slashed in the UK.
The main banks that have trimmed down their staff include
The Royal Bank of Scotland Group Plc
(
RBS
),
Lloyds Banking Group Plc
(
LYG
) and
Barclays Plc
(
BCS
).
Conclusion
The latest move by HSBC to shrink its workforce will definitely
go a long way, helping it implement its long-term strategy of
improving profitability. However, this would add to the
ever-increasing unemployment rate in the UK, which has been facing
a significant economic downturn.
Currently, HSBC retains a Zacks #2 Rank, which translates to a
short-term Buy rating.
BARCLAY PLC-ADR (
BCS
): Free Stock Analysis Report
HSBC HOLDINGS (
HBC
): Free Stock Analysis Report
LLOYDS BANK GRP (
LYG
): Free Stock Analysis Report
ROYAL BK SC-ADR (
RBS
): Free Stock Analysis Report
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