HK won't be spared as bank cuts jobs

PUBLISHED : Wednesday, 03 August, 2011, 12:00am
UPDATED : Wednesday, 03 August, 2011, 12:00am


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HSBC staff in the Asia-Pacific region, including Hong Kong, may not be spared as the bank cuts 30,000 jobs.

Chief executive Stuart Gulliver warned yesterday the bank intended to restructure back-office support functions across the whole group.

'The bureaucracy makes us a lot less nimble, a lot less fast to respond than we would otherwise be,' he said. 'So the 30,000 jobs are not just in the West - that's not the correct interpretation.'

The first round of lay-offs is expected to affect around 5,000 staff - 700 each in France and Britain, 1,400 in Latin America and 1,900 in the United States.

The bank will then eliminate 25,000 jobs, mostly in back offices, but will create an additional 15,000 jobs in emerging markets such as Argentina, Brazil, Mexico, the Persian Gulf and the Asia-Pacific over three years. Gulliver said that while wage inflation was high in some emerging markets, the group's plan to hire new talent gradually would ease the pressure.

HSBC Asia-Pacific chief executive Peter Wong Tung-shun could not give a specific figure for job cuts in Hong Kong, but said there would definitely be a 'reallocation of resources'.

Wong also said that in the second half of this year, the bank's Asia-Pacific operation would be more cautious due to the debt problems in the US, the crisis in the euro zone and uncertainty in the Middle East.

Despite reporting better-thanexpected first-half profit of US$11.1 billion, HSBC is continuing with restructuring plans announced in May. Its plan to prune nearly one-tenth of global staff as part of efforts to raise its return on equity (ROE), which was below target in the first half of the year. ROE measures a bank's profitability against shareholders' capital.

ROE rose 3.4 percentage points from the second half of last year, to 12.3 per cent. But this figure was calculated based on the Basel II regulations on capital adequacy and liquidity issued by members of the international Basel Committee on Banking Supervision. The target Gulliver has set is based on Basel III, the new global regulatory standard.

HSBC needed to make US$13.5 billion in first-half pre-tax profit, and double that amount for the full year, if it wished to meet its target.

'We're not celebrating here at HSBC that we're 12.3 per cent [on ROE]. We know there's a long way to go,' Gulliver said.

Analysts were generally upbeat about the bank's performance; 27 out of 35 analysts put a 'buy' recommendation on HSBC's stock. The share price closed up 1.23 per cent, or 95 HK cents, at HK$77.90 yesterday, while the Hang Seng Index fell 1.07 per cent yesterday.

Steve Chan, MF Global Hong Kong head of Asian financial equity markets, who upgraded HSBC from a 'hold' to a 'buy', said the bank posted good loan growth outside the United States and its asset quality had improved.

But RBS analysts downgraded HSBC to a 'hold' partly due to the bank's heavy exposure to the economies of the United States and Europe.