HSBC's cost cutting looks well ahead of schedule despite $800m severance payout
Cutting $1.5bn in costs is no easy feat, but when you cut entire businesses, including expensive investment banking outfits in London and New York, it gets a little easier. HSBC has been saving a lot of money by making cuts... it's also paying a lot of severance.
Bloomberg reports that thousands of HSBC staff have been cut. Those departing include senior executives, which might explain why the bank has paid ~$800m in "severance and other up-front costs" for the year-to-date. For reference, severance payments made by the bank last year reached as high as $9.3m for one of its employees.
Severance wasn't the only major expense for HSBC last quarter. It also reported $1.4bn in legal provisions, the majority of which pertains to a lawsuit over Bernie Madoff's Ponzi scheme.
The bank said that it actioned annualized cost saving of $1bn in the last nine months. HSBC's deadline for the $1.5bn cost saving, set at the start of the year, is 2026. That means it's 66% of the way through the work with over a year left to go; the implication is that its cuts are well ahead of schedule.
However, if the deadline is for those cuts to be actually recognized in the bank's PnL, HSBC appears to be lagging a little behind schedule. The realised cost saving was only ~$300m at the end of the third quarter, but the bank said it expects $700m of its cost savings to be recognized in its PnL by the end of the year.
Despite all the cuts, headcount at HSBC has actually risen. Since the start of the year, the bank has increased full-time employee headcount by 1,105 people, now employing 212,409 people. It has, however, been cutting contractors; it cut its contractor headcount by 140, roughly 3.4% of its total contract staff.
In spite of the impending closure of its UK and US teams, HSBC's investment banking division has been having a good year. So far this year, it has brought in revenues of $762m, up from $703 last year. Revenues in the last quarter specifically, however, were down 5.6% year-on-year.
Have a confidential story, tip, or comment you’d like to share? Contact: WhatsApp: http://wa.me/442079977910 (+44 20 7997 7910), Telegram: @AlexMcMurray, Signal: @AlexMcMurrayEFC.88 Click here to fill in our anonymous form, or email editortips@efinancialcareers.com.
Bear with us if you leave a comment at the bottom of this article: comments are moderated intermittently by human beings. Sometimes these humans might be asleep, or away from their desks, so it may take a while for your comment to appear. You must take sole responsibility for comments you post on this site. We will take reasonable steps to weed out anything that we consider to be offensive or inappropriate.
