British multinational investment bank HSBC Holdings PLC plans to cut billions in assets and begin restructuring in Europe and the United States. It is considered as one of the most prominent restructurings works in years and is mainly aimed to improve returns.
Plans of reorganization is a response to the 2019 profit falls to 33%.
Moreover, the announcement of a new strategy is also connected to various events such as slow economic growth in major markets, deadly coronavirus, Britain’s withdrawal from the European Union and low-interest rates.
HSBC considerably benefited from the investment in Asia(especially China) in recent years, though stagnation in Europe and the United States massively affected its returns.
Noel Quinn, who is an interim Chief Executive of the bank, presented the strategy. Appointing a permanent CEO in HSBC was protracted, and it may take between 6-12 months.
Rumours say that besides announcing the strategy, Noel Quinn is also fighting for the permanent role of CEO.
While talking about restructuring initiatives, Quinn added that the strategy would create a more stable, competitive team that would be better prepared to deliver higher returns.
While HSBC is the largest bank in Europe in terms of assets and makes much of its revenue in Asia, the bank has undergone considerable profit drops in 2019.
HSBC declared it is determined to reach a reduced cost base of $31 billion or below in 2022.
What does new strategy mean for HSBC?
As it has already mentioned above the bank suffered in the United States for years and HSBC noted, it was time to reshape the business in the United States. It will close approximately 70 branches and mainly aim wealthier clients.
HSBC plans to design one of the world’s largest wealth management business by combining retail banking and wealth management business.
The bank will significantly diminish sales in European cash equities as well and concentrate on bolstering equity capital market transactions.
HSBC also mentioned that the outbreak of deadly coronavirus impacted its staff and clients, and in the long term, it will severely reduce revenue and trigger bad loans.
Quinn added that it was possible to reduce revenues through lower lendings and transaction volumes.
Even though the number of coronavirus infection decreased notably on Tuesday since January, it is still early for the outbreak to be contained, and there is much to do.
There has been one case of the death from coronavirus in Europe, as a 25-year-old Chinese tourist died in France on 15 February 2020.