Investors have snubbed HSBC's multibillion-dollar cost-cutting plan, with the announcement failing to push up the price of its long-underperforming shares.
HSBC shares closed at HK$81 on Friday after trading between HK$80.55 and HK$83.05 in the days since the lender unveiled on May 11 its biggest cost-slashing plan. On May 9, the shares closed at HK$84.
Analysts and brokers said investors had not rushed to buy the stock as the proposal to cut costs by up to US$3.5 billion to boost profit would take time. They also wanted to see more details from the bank on how it will increase revenue growth.
'Cost-cutting or restructuring plans will need two to three years to complete and to generate profit,' Sun Hung Kai financial director Joseph Tong Tang said.
Henry Kwok Wai-ki, investment manager at ICBC Investment Management, did not think the measures would make HSBC more attractive. 'I like to see earnings growth coming from the top line,' he said.
The plan unveiled by HSBC chief executive Stuart Gulliver involved closing loss-making branches and operations while boosting business on the mainland and in other emerging markets. He planned to cut annual costs by US$2.5 billion to US$3.5 billion by 2013.
Gulliver vowed to keep HSBC's growing China and India retail banking operations open, even though they are losing money. But it may withdraw from 39 loss-making retail banking markets. Hong Kong and Britain, the bank's two most profitable markets, will not be affected.