HSBC is targeting savings of $1.5 billion US (£1.2bn) by the end of 2026, the firm announced.
The UK’s largest bank confirmed its plans to make cost reductions as it revealed a pre-tax profit of $32.3bn (£25.6bn) for 2024 on Wednesday in its annual results. That figure was up from $30.3bn (£24.1bn) in 2023.
The bank has undergone significant change in recent months under the leadership of chief executive Georges Elhedery, who has spearheaded an overhaul of its global structure as part of plans to drastically reduce costs and focus on more profitable parts of the business.
HSBC is the third-largest company listed on the London Stock Exchange, with a market cap more than three times the size of that of Barclays, the next-biggest bank in the UK. Shares are up 41 per cent in HSBC over the past year and 58 per cent over five years, but remain some way off their pre-financial crisis highs.
The group said it will look to reduce its global staff costs by 8 per cent, with senior managers and those in its newly merged wholesale corporate and institutional arm set to be in the line of fire.
HSBC warned that the UK head office is likely to bear the brunt of the cuts, but declined to give details of how many jobs will go, or provide a breakdown by country. Group chief executive Georges Elhedery said the group is “not tracking headcount reduction” and is instead focusing on lowering costs.
He stressed that the bank’s 211,300-strong global workforce will not fall by as much as 8 per cent, because many of the jobs going will be at a more senior level and therefore more highly paid. But he added that the cuts will be “more borne by the head office in the UK”.
The group will strip out roles that are duplicated as a result of its recent overhaul, which has seen it reorganise into eastern and western units and merge two of its three main divisions, stripping out a layer of senior bankers.
HSBC is also withdrawing from mergers and acquisitions banking activity in the UK, Europe and the US.
Details of the staff cuts came as HSBC also revealed in its annual report that it plans to increase Mr Elhedery’s total potential annual pay package to £15.3m for 2025 – or even £19.8m for 2025, if the bank’s shares rise by 50 per cent.
The pay overhaul plans will be voted on by shareholders at the bank’s annual general meeting on May 2.
The announcement said the company’s reorganisation aims to generate cost reductions of $0.3bn (£0.24bn) in 2025 with the commitment to the $1.5bn (£1.2bn) annualised reduction in the cost base expected by the end of 2026.
To achieve the reduction, the bank said it planned to incur $1.8bn (£1.4bn) in severance and other up-front costs over the next two years, as well as redeploying around $1.5bn (£1.2bn) from “non-strategic activities” to areas where it has “a clear competitive advantage”.
Mr Elhedery said: “Our strong 2024 performance provides firm financial foundations upon which to build for the future, as we prioritise delivering sustainable strategic growth and the best outcomes for our customers.
“I have focused on simplifying how we operate and injected energy and intent into the way we deliver our strategy. We are creating a simple, more agile, focused bank built on our core strengths.”
He continued: “I have put in place a smaller, core team of exceptionally talented leaders driven by a growth orientated mindset and a firm focus on dynamically managing our costs and capital.
“We are embedding this approach across the organisation to ensure we are continually focused on these two important principles.”
Profit after tax increased by $0.4bn (£0.3bn) to $25bn (£19.8bn). Revenue throughout the year remained stable at $65.9 bn (£52.2bn) while operating expenses rose by $1bn (£0.8bn).
