The new CEO at HSBC aims to save the bank a significant sum of $1.8 billion within a two-year period.
HSBC's CEO, Georges Elhedery, has rolled out a strategic plan to boost returns and hone in on Asia's market. This strategy encompasses various cost-cutting measures and structural changes. Here are the essential elements of Elhedery's blueprint:
Strategic Shifts
- Business Reorganization: HSBC intends to divide its operations into four main business lines: UK, Hong Kong, corporate and institutional banking, and wealth banking[1][2][4].
- Streamlined Geography: The bank plans to merge its Asia-Pacific and Middle East regions, while blending its European and US operations, creating a more simplified and unified geographical setup[1][5].
Cost Reductions
- Annual Savings Goal: HSBC seeks to achieve $1.5 billion in annual cost savings by 2026, with initial targets of $300 million in reductions for 2025[1][3][4].
- Senior Management Overhaul: Elhedery has initiated the letting go of a tier of senior managers, with hundreds of them required to reapply for their positions. Additionally, the bank has reduced around 40 investment banking jobs in Hong Kong, including four managing directors[2][5].
Technology Investment
- Technological Modernization: The bank is modernizing its infrastructure and investing in advanced technologies like AI, generative AI, data, and analytics to improve operational efficiency[1][4].
Share Buy-Back
To further improve shareholder value, HSBC announced a share buy-back program of up to $2 billion, targeted to be completed before the release of their first-quarter results[1][3][4].
Financial Performance and Share Price
- Earnings Revenue: HSBC reported a pre-tax profit of $32.3 billion in 2024, showcasing a six percent growth from the prior year. Profit attributed to shareholders increased two percent, totaling $22.9 billion[1][3][4].
- Profit Divisions: The wealth and personal banking division generated $12.2 billion in pre-tax profit, marking a 5.2 percent increase from the previous year, giving rise to new customer acquisitions and increased wealth management product sales[3].
- Share Price Movement: Despite the widespread cost-cutting and restructuring, HSBC's Hong Kong-listed shares have climbed to an 11-year high, recording a 1.7 percent gain during the earnings announcement[1][2][3].
- Market Index Performance: The broader market index dipped slightly by 0.1 percent, yet HSBC's shares outperformed, revealing investor confidence in the bank's strategic plan and financial performance[3].
In summary, Elhedery's strategic plan and cost reduction measures target long-term growth for HSBC by focusing on its core strengths in the Asian market, amplifying operational efficiency, and plowing resources into technology. These initiatives have positively impacted the bank's earnings and share price performance.
- HSBC aims to raise efficiencies by investing in advanced technologies like AI and data analytics by 2025, as part of their strategic plan to boost returns and focus on Asia's market, led by CEO Georges Elhedery.
- Amidst the cost-cutting and restructuring efforts announced by HSBC, their shares, particularly the Hong Kong-listed ones, have been quite resilient, raising doubts about whether the muddied waters of the business changes might affect the stock's performance in the long run.
- In an effort to enhance shareholder value and complement their cost reduction strategy, HSBC has planned to raise funds by implementing a share buy-back program worth up to $2 billion before releasing their first-quarter results in 2025.
