HSBC says its unwanted bankers cost $300m a year and didn't make a profit

Amidst the complaints, HSBC has today explained the rationale behind the closure of its M&A and equity capital markets (ECM) businesses in the UK, the US and Europe. - They cost a lot and didn't make a profit. 

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In combination, these businesses cost $300m a year, said HSBC. By closing them down, the bank says it will be able to deliver $300m directly to its bottom line in 2025.

It's still not clear how many jobs will go as part of the cuts, which have already taken place in Hong Kong and are expected to occur in the US on Thursday and the UK on Friday this week. 

As it cuts jobs across the bank, including from the closure of regional banking teams, the "deduplication" of overlapping management roles in the corporate bank and investment bank and from "simplifying management across the business/region matrix", HSBC expects to spend $1.8bn on severance payments and "other upfront costs" this year and next year. Around two thirds of this will be spent in 2025.

By 2026, however, HSBC also expects to have saved $1.5bn in total. It said today that it intends to spend these savings reinvesting in "areas where we have clear competitive advantages and generate accretive returns." 

In the corporate and investment bank, these areas of planned future investment are: the transaction bank, where HSBC wants to benefit from "changing trade and capital flows;" and "risk distribution capabilities" as HSBC seeks to benefit from "strong underwriting capabilities."

Senior insiders sceptical of the new strategy have pointed out that HSBC's transaction bank is global and may suffer from the closure of its regional investment banking teams. And as HSBC builds on its underwriting capabilities and invests in salespeople to distribute risk, it is closing ECM teams in key markets. 

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