HSBC holdings (00005.hk) on February 18th unveiled a new three-year strategic plan to reduce its size globally. The global banking giant hopes to return to growth due to huge cost savings and efficiencies amid a volatile international political and economic climate, but the cost of achieving the target will exceed 50 billion yuan.
HSBC holdings group’s 2019 results report released on February 18 showed that due to a goodwill impairment of $7.3 billion, common shareholders on the accounting basis should account for $6 billion of profits, down 53%; The reported base ex-tax profit was $13.3 billion, down 33 percent.
Global Banks “Broken Arms”
In a slowing economic growth and a global easing environment, the international banks suffered from a winter of performance, large-scale restructuring and layoffs became the decision to be made.
Analysts say job losses have become a way for banks to cut costs in recent years due to high management costs. The cost-to-income ratio in developed countries is generally high, with the cost-income ratio of the major major banks reaching about 60% in 2018.
Reducing the size of the workforce has become an important means for some major international financial institutions to reduce management costs.
Deutsche bank announced in July last year that it would reduce its investment banking business and expects to cut about 18,000 jobs worldwide, or about 20 percent of the bank’s workforce.
Big banks like Citigroup have also been reported to lay off workers. At the end of July, it emerged that Citigroup planned to cut its staff in both fixed line and stock trading, or 10 percent of its workforce, in 2019.
In August, Barclays said it had cut 3,000 jobs in the second quarter, or about 3.6 percent of its workforce by the end of 2018, due to “clear challenges to the business environment so far this year.”
More than 50 Banks around the world announced job cuts in 2019, with 77,780 planned, the highest level since 2015, according to bloomberg.
European banks have been hardest hit by job losses, with banks unveiling plans to cut 635,000 people, or about 82 percent of the total. The top 10 banks to cut jobs are Deutsche Bank, Yussin Bank of Italy, Santander, Commerzbank, HSBC, Barclays, Alpha Bank, Union Bank of Belgium, Societe Generale and Kexa Bank.
Reducing the size of your staff is an important means of reducing management costs. Some of the biggest Banks, such as Citigroup, HSBC, RBS, Barclays and Unicredit, have seen their headcount decline for years after the 2008 financial crisis. Some of the biggest banks, such as JPMorgan Chase, Bank of America, BNP Paribas and Deutsche Bank, showed a trend of up-and-down workers.
As the financial sector has moved into a cyclical phase, the banking sector has changed, with business shrinking, which is the reason for the current large-scale layoffs in the banking industry.
There are three key factors in the cold winter experience driven by large overseas banks:
First, the global economy is not growing well.
Secondly, the impact of negative interest rates, in the face of weak economic growth, economic slowdown, many countries have cut interest rates to perform negative interest rates, the biggest impact are the banks.
The third is the impact of unmanned banking. With the development of artificial intelligence technology, the off-counter rate of Banks is gradually increasing, and the offline outlets are also shrinking.
As the market environment changes and fintech companies and virtual Banks bring huge impact to traditional Banks, the banking industry will further increase the layoffs and compensation system reform, reduce labor costs.