On the Cutting Floor: HSBC announces job cuts
March 24, 2020
2 min read
What's going on here?
HSBC is set to cut around 35,000 jobs after announcing a major slump in profits for 2019.
What does this mean?
HSBC is making these cuts, worth £3.5bn, as part of a wider restructuring plan over the next 3 years. The more than 30% drop in profits is mainly attributed to its write-offs. These write-offs, amounting to £5.6bn, are in its European investment and commercial banking operations. This fall in profits, along with the cumulative impact of the Covid-19 coronavirus, Brexit and low-interest rates in the global market has prompted the formulation of this restructuring strategy.
What's the big picture effect?
The bank’s cuts are likely to be focused on its American and European operations as most of the company’s profits come from Asia, where the bank has better long term prospects. The bank’s profits also took a hit due to the political unrest in Hong Kong and the uncertainties surrounding the US-China trade war last year.
As a result of this restructuring announcement, Union officials from Unite have sprung into action in the UK, fearing widespread cutbacks in the bank’s operations in the country. The restructuring will also see the bank merge its retail banking, private banking and wealth management divisions. The coronavirus outbreak further complicates matters as 90% of the bank’s profits came from its Asian business. This means that while the effects of the outbreak have not been fully accounted for, harsher measures still might be brought in once the full extent of the losses is known.
While the bank has said it will deal with the downsizing in a “sensible and sensitive manner”, it is still being touted as one of the most radical moves with respect to personnel and assets for the bank. Analysts have predicted that the UK might face as many as 15,000 of the 35,000 job cuts.
This comes after Deutsche Bank’s restructuring and its announcement of 18,000 job cuts across all operations last year. Barclays have also slashed 3,000 jobs in the last quarter of 2019. The financial section of the final Brexit deal remains one of the most hotly contested. How it is concluded may decide whether other UK banks decide to follow suit and scale back UK operations, which would surely lead to additional uncertainty following Brexit.
Report written by Maya Sajeev
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