HSBC has announced it will cut up to 30,000 positions, while it revealed mixed results for its markets, wealth management and private banking segments.

HSBC Executives Stuart Gulliver, Doug Flint and Iain Mackay

HSBC, the Hong Kong and London-listed banking giant is slashing a total of 30,000 jobs, equal to a tenth of the workforce - with 5,000 already having been announced, it said today. While its global banking and markets division logged a drop in pre-tax profits in the first half of this year, retail banking and wealth management saw a sharp improvement. 

Retail and wealth management arm logged pre-tax profits for the six months to 30 June of $3.126 billion, surging from $1.352 billion a year before. Meanwhile, pre-tax profits on global banking and markets fell to $4.811 billion from $5.452 billion from a year before.

The results were announced a few hours after the bank said it was selling 195 retail branches in the US northeast.

"There will probably be somewhere in the order of 25,000 additional roles [that] will be eliminated between now and the end of 2013 – but that’s a gross number, meaning that we will continue to hire in many countries around the world. I mean, in the first half of this year, we’ve added almost 1,000 people in Hong Kong; we’ve also added about 1,360 for all of Asia Pacific; we’ve also added about 800 people in Brazil and Mexico," Stuart Gulliver, chief executive, said in a conference call about the results. In a statement, he said the bank has already announced restructurings that will cut 5,000 jobs.

"So although there will be 25,000 jobs eliminated, it’s unlikely that the actual headcount of the firm will be 296,000 minus 30 [thousand], because we will be adding people in different parts of the world," he said. 

"But it will be fair to say that there’s another 25,000 additional roles that will be eliminated throughout the world in addition to the 5,000 that we’ve already talked about," Gulliver said. 

Gulliver said he still believes the bank is on track to add between four and five thousand jobs per annum in emerging markets. 

Private banking 

Global private banking pre-tax profits fell slightly to $552 million from $556 million in the same half-year period in 2010, HSBC said in its statement.

Across the entire HSBC banking empire, it logged a half-year profit of $11.474 billion, up from $11.104 billion. The bank said all its regions were profitable with gains in Asia, Latin America, the Middle East and North America. HSBC said its core tier 1 capital ratio – a key barometer of a financial institution’s strength - increased to 10.8 per cent from 10.5 per cent during the reporting period. The group had a cost efficiency ratio of 57.5 per cent, up from 50.9 per cent in the first half of last year.

Stuart Gulliver, chief executive, said HSBC is targeting $2.5 to $3.5 billion of “sustainable cost savings” by 2013 and since the start of this year, restructuring in the US, UK, Latin America, France and the Middle East. As announced today, HSBC has announced it will sell 195 “non-strategic” branches in upstate New York. The bank has already shuttered retail businesses in Russia and Poland.

“We remain positive on the outlook for emerging markets. We expect a soft landing in China and we believe Hong Kong is well-equipped to mitigate overheating pressures. We expect continued growth in the rest of Asia-Pacific and Latin America and take comfort from the focus of the authorities on managing inflationary pressures. In the Middle East, the outlook for the Gulf Cooperation Council economies is also positive,” said Gulliver in a prepared statement.

In the developed world, growth in the US and Europe is likely to remain sluggish as long as the impact of high debt levels and government budget cuts weigh on economic activity. In the UK, we remain concerned that regulatory actions being contemplated and the ongoing regulatory uncertainty will constrain the supply of credit to the real economy and contribute to sub-par economic growth,” he added.

UK stockbroker and investment firm Charles Stanley has kept an “accumulate” recommendation on HSBC’s stock, saying it was encouraged by the bank’s figures.

“We think overall this was a positive set of results from HSBC and although very early days it should give some encouragement to the new chairman and chief executive that their strategic targets are attainable,” it said.

“It was no surprise that that the global banking and markets business suffered a decline in profits but that the retail banking and wealth management and the commercial bank delivered such strong profit growth is positive. Of course significant risks remain whether one considers the impact of regulators, sovereign debt issues, the potential for a hard landing in China or increasing inflationary pressures in Hong Kong. But despite these risks, trading on around 10x 2011 earnings and with a yield of 4 per cent our recommendation on the stock remains.”