The banking behemoth HSBC announced on Wednesday that by the end of 2026, President Georges Elhedery’s strategy, which has been in place since October, will result in yearly cost savings of $1.5 billion.
“Our cost target includes the impact of simplification-related saves associated with our announced reorganisation, which aims to generate approximately $0.3 billion of cost reductions in 2025, with a commitment to an annualised reduction of $1.5 billion in our cost base expected by the end of 2026,” the London-headquartered bank said in an exchange filing.
The biggest bank in Europe has been rocked by Elhedery’s proposal for a “simpler, more dynamic, and agile organization,” and its Hong Kong stock has surged to an 11-year high.
On Wednesday, HSBC reported that its 2024 pre-tax profits increased 6% to $32.3 billion, while its profit attributable to shareholders increased 2% to $22.9 billion.
“Our strong 2024 performance provides firm financial foundations upon which to build for the future,” Elhedery said in the earnings statement.
With the majority of its revenue coming from Asia, HSBC has spent the last several years shifting its focus to the area, promising to expand its wealth division and focus on rapidly expanding markets.
The lender said that it will streamline its organizational structure and divide it into four sections: Hong Kong, the United Kingdom, “corporate and institutional banking,” and “international wealth and premier banking” a few days after Elhedery was appointed CEO.
Along with consolidating its European and US businesses, the bank will also simplify its geographic setup by combining its Asia-Pacific and Middle East divisions.
Hundreds of managers have apparently been encouraged to reapply for their positions as part of Elhedery’s efforts to reduce the number of senior bankers.
Cuts are under way in HSBC’s markets division and wider layoffs at its investment bank will start as early as this week, Bloomberg News reported.
The bank said last month it would wind down parts of its investment banking operations in Europe, the United Kingdom and the Americas.
Bloomberg reports that HSBC plans to finish the reorganization by June.
Both Hong Kong and Britain are seen by the lender as its “home markets,” but the delicate balancing act has been put under strain as ties between China and the West deteriorate.
In 2023, Elhedery’s predecessor resisted a demand that HSBC sell out its assets in Asia.
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