HSBC Stock Dips On Weak Profit; To Suspend Buybacks; Plans 35,000 Job Cuts

Shares of HSBC Holdings Plc (HSBC,HSBA.L) were losing around 6 percent in London trading after the British bank focused on Asia reported sharp drop in fiscal 2019 profit, hurt mainly by a hefty impairment charge, despite revenue growth.

Further, the company announced a new cost reduction plan of $4.5 billion, which reportedly will include the slashing of 35,000 jobs mainly in the underperforming units in the U.S. and Europe over the next three years.

HSBC also said it plans to suspend share buy-backs for 2020 and 2021, due to the high level of restructuring expected to be undertaken over the next two years.

In its earnings report, the company further announced plans to reduce gross assets of over $100 billion by the end of 2022.

The company projects a reduced adjusted cost base of $31 billion or below in 2022, underpinned by its new cost reduction plan of $4.5 billion. The company targets a reported RoTE in the range of 10 percent to 12 percent in 2022.

To achieve its targets, HSBC expects to incur restructuring costs of around $6 billion and asset disposal costs of around $1.2 billion during the period to 2022. Majority of these restructuring costs will be incurred in 2020 and 2021.

Regarding its planned job cuts, HSBC Interim Chief Executive Noel Quinn reportedly said the company’s staff numbers could drop by 15 percent from current 235,000 employees. Quinn said, “We are looking at an endgame of closer to 200,000.” Most of the job cuts reportedly will be in its European and U.S. investment banking businesses, particularly in fixed income.

With the planned restructuring, HSBC expects to give more focus on investment banking units in Asia, from where it draws most of its revenue, and the Middle East.

The company also said it intends to return to neutralising scrip dividend issuance from 2022 onwards.

Regarding the ongoing coronavirus outbreak, the company warned that the economic disruption in Hong Kong and mainland China may impact performance in 2020. Due to the impact, the company has lowered expectations for growth in the Asian economy in 2020.

For fiscal 2019, HSBC’s profit attributable to the ordinary shareholders of the parent plunged 53 percent to $5.97 billion from last year’s $12.61 billion. Earnings per share fell to $0.30 from $0.63 a year ago.

The latest results were impacted by a goodwill impairment of $7.3 billion related to the bank’s investment and commercial banking operations in Europe.

Reported profit before tax was down 33 percent to $13.3 billion. Adjusted profit before tax was $22.21 billion, compared to $21.18 billion last year.

Revenue for the year, however, went up 4 percent $56.10 billion from $53.78 billion a year ago. Adjusted revenue grew 5.9 percent to $55.4 billion.

The company reported good revenue growth in Retail Banking and Wealth Management, Global Private Banking and CMB, together with improved cost control.

In London, HSBC shares were trading at 553.20 pence, down 6.37 percent.

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