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- Category: Economics
Coronavirus threat could cause interim profit loss for the bank
HSBC announced earlier this month plans to slash jobs in Europe, the US and Asia over the next three years as part of a worldwide restructuring plan to introduce tech that will make a total of 35,000 employees redundant.
The bank, which operates in 64 countries, aims to cut the cost of European operations by 25%, mainly at their London headquarters.
HSBC announced that there would be “meaningful job cuts in the UK”, where the bank’s London-based head office employs about 40,000 staff, as well as among its global banks and markets business.
HSBC interim chief executive, Noel Quinn, said early February that the group’s global workforce would be reduced by about 15% in the ‘simplification programme’ that aims to cut costs by $4.5bn (£3.5bn) with the introduction of automation.
“We would expect our headcount to decrease from the current level of 235,000 to be closer to 200,000 in 2022,” Quinn said.
The news has set off alarm bells among union officials, who have demanded urgent talks with HSBC on the planned spending cuts.
“Once again, hardworking and dedicated staff have woken up to the news that their jobs could be at risk,” said Unite’s national officer for finance, Dominic Hook.
“Unite is seeking urgent discussions with senior management to understand the serious impact of this announcement and what it will mean for our members in the UK,” said Hook.
HSBC plans to close 224 branches in the US as part of the restructuring program set to shed $100bn worth of assets by the end of 2022.
The bank also issued a warning over the impact of the coronavirus outbreak in Asia.
With the bulk of the bank’s profits originating from Asia, the bank also warned that the coronavirus outbreak could impact its performance in 2020, citing major disruptions for staff, suppliers and customers, particularly in mainland China and Hong Kong.
HSBC’s chief financial officer, Ewen Stevenson, warned that the bank could be forced to set aside up to $600m if the outbreak continues to spread on the second half of the year as a provision against potential loss of business.
The provisions for coronavirus would help cover bad debts in the event that customers start to default on their loans or if individual borrowers fall ill.
There’s also the possibility of corporate customers facing financial difficulty if supply chains continue to be disrupted with trade restrictions or factory closures, particularly in China, said the chief financial officer.
The bank is waiting until its full-year results before confirming the impact of the virus when it releases first-quarter earnings on 28 April.
HSBC’s profits before tax for 2019 were below analysts’ forecasts; dropping by 33 per cent to $13.3bn.
Quinn said the bank is still committed to China but news of the coronavirus outbreak is the latest challenge HSBC has had to face in Asia.
Anti-government protests in Hong Kong and tensions over the US-China trade war last year have also affected the bank.