HSBC is to divide its operations into eastern and western markets as part of a major shake-up under its new chief executive, Georges Elhedery, which will help it cut costs and navigate rising geopolitical tensions between China and the west.
The sweeping overhaul, which comes six weeks after Elhedery, the bank’s former finance chief, took the reins from Noel Quinn, will set up a new operating committee to take responsibility for four lines of business. They include a standalone UK division and a Hong Kong division where bosses will be in charge of “eastern markets” covering Asia and the Middle East.
The two other divisions will cover international wealth and premier banking, and corporate and institutional banking, with the latter in charge of wholesale operations in “western markets” including the UK, Europe, Latin America and North America.
It will mean HSBC departing from its current set-up centred on three main divisions: commercial banking, global banking and markets, and wealth and personal banking.
The reshuffle reflects historical complications in its global banking model. The bank makes most of its profits in Asia, but it remains headquartered in London, giving western leaders an opportunity to exert pressure over its relationship with the ruling Communist party in China. HSBC bosses were particularly hard-pressed over a controversial decision to stay neutral over Beijing’s crackdown on democracy advocates in Hong Kong.
HSBC bosses have also been targeted by Asian investors incensed after the bank capitulated to UK regulators and cancelled dividends in the early days of the Covid pandemic.
The bosses have managed to fend off calls led by its top shareholder, China’s Ping An Asset Management, to break up the bank, but Elhedery’s restructuring plan signals it may be braced for heightened tensions in the months head.
That includes the potential fallout from next month’s US election, with fears that a Donald Trump victory could heighten a geopolitical rift with HSBC’s key market in China.
HSBC did not confirm whether Elhedery’s restructuring plans would involve job cuts, saying only that the changes, which come into force on 1 January 2025, will “reduce the duplication of processes and decision-making that are built into the current structure”.
The bank said it would give further details when it reports full-year results in February.
“Unknown and important are the magnitude of any required restructuring charges,” the UBS banking analyst Jason Napier said. “Aligning functions for a group with 213,978 staff involves exceptional costs,” he said, but “a divisional shift provides the opportunity for new CEO cost reductions”.
Elhedery, who learned Mandarin during a six-month sabbatical two years ago, said: “The changes that we are announcing today will make it easier for our colleagues to serve our customers and drive the future success of the group. The new structure will result in a simpler, more dynamic and agile organisation.
“By making these changes, we can better focus on increasing leadership and market share in those businesses which have clear competitive advantage and the greatest opportunities to grow.”
The bank also announced the promotion of its chief risk and compliance officer, Pam Kaur, to chief financial officer, replacing Elhedery, who was promoted from the role last month. Kaur is the first woman to occupy the role in HSBC’s 159-year history. A qualified chartered accountant, she joined as head of audit in 2013 and has almost 40 years’ experience working for UK, US and German banks.
Elhedery is reportedly preparing to cut the jobs of some of the bank’s most expensive senior bankers in a move that could save as much as $300m (£229m), the Financial Times reported this month.
HSBC will report its third-quarter results on 29 October.
