HSBC Holdings Plc will incur $1.8 billion in costs over the next two years as it embarks on a global restructuring program that has seen the lender close some of its businesses and reduce management ranks.
Europe's largest bank, which has been expanding into Asia and some Middle Eastern markets, reported a fourth-quarter pretax profit of $2.3 billion, exceeding expectations. HSBC also expects to cut expenses by $1.5 billion per year.
"Since becoming CEO, I have focused on simplifying how we operate and injected energy and intent into the way we deliver our strategy," Chief Executive Officer Georges Elhedery said in a statement, which also detailed a $2 billion share buyback. "We are creating a simple, more agile, focused bank built on our core strengths."
With Elhedery at the helm for roughly six months, HSBC has experienced one of the most significant upheavals in more than a decade. He closed some of the lender's investment banking operations in Europe, the United Kingdom, and the Americas in an effort to focus on areas where it could "best serve" its corporate and institutional clients. The broad moves have also resulted in a slew of top executives leaving.
According to HSBC, the bank's "severance and other up-front costs" will be spread out over this and next year. The lender is focusing on "opportunities where we have a clear competitive advantage," HSBC added.
Bloomberg News reported in December that HSBC was looking into ways to cut costs by at least $3 billion, which would reduce its annual expense bill by about 10%. For months, top officials have been debating the size of the cuts.
Days after succeeding Noel Quinn as CEO, Elhedery told a townhall meeting in Hong Kong that he would prioritize cost control. Six weeks later, he unveiled the revamp, which included the formation of a new global commercial and institutional banking unit by combining two of the lender's largest divisions, as well as the separation of Hong Kong and the United Kingdom into standalone businesses.
Further management changes have occurred, including the announcement in December of Annabel Spring's departure as global head of private banking. Other senior managers were forced to reapply for their positions. "The process has been measured, thoughtful, and fair," Elhedery explained at the time.
The CEO has also announced plans for additional asset sales and business closures, including a strategic review of the bank's Maltese operations, the sale of its South African corporate banking unit, and the closure of HSBC's Zing payments app. Last month, the bank announced that it would discontinue M&A and equity underwriting services in New York, London, and continental Europe.
