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HSBC plans $100 billion in asset sales and major revamp after profits slide

By Amanda Cooper

Plans to include job cuts and an overhaul of European investment bank

HSBC plans to sell assets worth $100 billion over the next three years and overhaul its US and European businesses, as it grapples with a slowing global economy and the fallout from the coronavirus.

The company, which is Europe’s largest lender by assets, reported pre-tax profit of $13.3 billion in 2019, marking a 33-per cent drop from the previous year, and said it had taken a $7.3-billion charge stemming from global banking and markets and commercial banking business units in Europe, HSBC said in its earnings statement.

“The Group’s 2019 performance was resilient, however parts of our business are not delivering acceptable returns,” said acting chief executive Noel Quinn. “We are therefore outlining a revised plan to increase returns for investors, create the capacity for future investment, and build a platform for sustainable growth.”

HSBC said it planned to dispose of $100 billion in assets by the end of 2022, the proceeds of which would be reinvested, leaving its asset base broadly unchanged.

Investors took the news hard, punishing HSBC shares, which fell by nearly 5 per cent in morning trading in London.

The company said it would cut costs by a further $4.5 billion, to reduce its adjusted cost base to, or below $31 billion in 2022. It also said it would suspend share buy-backs in 2021 and 2022, given the high costs associated with the restructuring.

Quinn told Reuters in an interview the process would involve the loss of 35,000 jobs worldwide.

“The totality of this program is that our headcount is likely to go from 235,000 to closer to 200,000 over the next three years,” Quinn was quoted by Reuters as saying.

In Europe, HSBC said it would merge several parts of its global markets group, which forms part of the investment bank, and would cut its equity sales and trading research. In the US, which will take the bulk of the losses, HSBC said it would close around a third of its retail bank outlets and shift some of its fixed-income operations to London.

HSBC, which makes the bulk of its money in Asia, warned the coronavirus that has killed nearly 2,000 people and infected over 70,000 around the world, posed a risk to performance this year.

“We continue to monitor the recent coronavirus outbreak, which is causing economic disruption in Hong Kong and mainland China and may impact performance in 2020,” the bank said.

The bank said it is aiming for a return on average tangible equity - a key measure of its profitability - of between 10 and 12 per cent in 2022, compared with 8.4 per cent in 2019.

FURTHER READING: Metro Bank’s biggest shareholder cuts stake again

FURTHER READING: Metro Bank’s biggest shareholder cuts stake again

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