British multinational investment banking giant HSBC plans to terminate about 35,000 of its global staff, or 15% of its workforce, over the next three years, with some of the job cuts due to technology and automation.
In an earnings call held on Tuesday, Noel Quinn, interim chief executive, revealed the bank also plans to ditch billions of dollars in assets by the end of 2022.
The strategy is to reallocate capital by removing more than $100 billion in low-returning, risk-weighted assets to support growth in other areas that promise higher returns.
Bank executives hope that the reduction in assets will be offset by other growth opportunities in more profitable regions like the Middle East and Asia. According to Quinn,
“We will implement an RWA upgrade program, stripping out low returning RWAs from the underperforming parts of our business and redeploying them into higher returning areas. We will execute a $4.5 billion cost reduction program to reduce total costs, even as we invest in the business. And we will simplify HSBC to increase revenue synergies and accelerate the pace of execution.”
Ongoing changes in the banking industry are putting pressure on legacy financial institutions that are struggling to combat fintech disruption. Back in 2017, HSBC, Europe’s largest bank, appointed a panel of advisors tasked with addressing rapid technological advancements and exploring ways to integrate blockchain, artificial intelligence and biometrics into its business model.
The panel is comprised of senior technologists and entrepreneurs from around the world engaged in blockchain and cryptocurrencies, cybersecurity, ecommerce, artificial intelligence, machine learning and data science.
HSBC’s panel of tech advisors
- Mickey Boodaei, CEO of Transmit Security, cybersecurity expert
- Steve Kirsch, CEO of Token, open banking expert
- Chris Larsen, Executive Chairman of Ripple, expert in blockchain
- Megan Quinn, General Partner at Spark Capital, Silicon Valley Venture Capital
- Dr. Kira Radinsky, Chief Scientist at eBay, machine learning and data science expert
- Haoyu Shen, former CEO of JD.com, ecommerce and internet expert
- Dr. Vishal Sikka, CEO of Infosys, artificial intelligence expert
- Dr. Gurjeet Singh, CEO of Ayasdi, artificial intelligence expert
According to HSBC the tech board facilitates the bank’s adoption of technology that improves processes for its 46 million customers and 250,000 colleagues across its global network.
In spite of efforts to address the changing landscape by consulting with forward-thinking industry experts, the bank’s profits before tax have nosedived from nearly $20 billion in 2018 to $13.3 billion in 2019, marking a 33% decline.
HSBC says it’s now entering a “deep and fundamental restructuring” by focusing on elements it can control as opposed to markets and other external factors.
As part of the overhaul strategy, the bank will close down a third of its 224 branches in the US and trim down units in Europe. It will also consolidate divisions to save costs.
HSBC unveils its restructuring amid falling interest rates and the threat of the coronavirus outbreak in Asia, which could have a significant impact on the bank’s 2020 earnings.
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