Editorial | HSBC is correct to bet on China, but now it must deliver
- After its misadventure to become a global bank, HSBC is returning to its roots
- Investors, however, have decided to wait and see how the move unfolds
Putting the right policy in place is one thing, executing it is another. After its misadventure in trying to become a global bank, there is no doubt that HSBC is correct in seeking to return to its business roots in Asia, especially in Hong Kong and the Greater Bay Area.
But it has been a bumpy ride, with no end in sight. Ordinarily, imposing job cuts and reducing costs on such a significant scale as it has announced in its latest overhaul should have been cheered by investors.
As it was, its share price in London lost almost 6 per cent on the day of the announcement. Shareholders have been far from impressed.
The strategic changes are the third major overhaul the banking giant has gone through since the global financial crisis more than a decade ago.
Aware that its size is having a negative impact on profitability, it aims to shed 35,000 out of a workforce of 235,000 and to offload assets worth more than US$100 billion, out of a total of US$843 billion, by 2022. It’s hoped that the money saved can be more profitably deployed elsewhere.
The cost reductions target mainly its investment bank, European assets and American business. As with the previous overhauls, the goal is to focus on Asia. No wonder, the region made up half of HSBC’s global revenue in 2019, and contributed almost all of its worldwide operating profit.