HSBC warns of job cuts, writedowns

Bloomberg

HSBC Holdings Plc embarked on its biggest overhaul in years after profit missed estimates, warning that it will pare back underperforming operations in the face of slowing economic growth and geopolitical uncertainty.
The bank, which makes almost 90% of its profit in Asia and employs 240,000 people, walked away from a key profitability target and said write-offs are likely for some of its European business and technology spending. For acting Chief Executive Officer Noel Quinn, who took over in August following the ouster of John Flint, the review is his chance to put his stamp on the sprawling lender. Cuts at the investment bank have already begun.
“Our previous plans are no longer sufficient to improve performance” in the US, continental Europe and British investment banking, given “the softer outlook for revenue growth,” Quinn said in a statement. “We are therefore accelerating plans to remodel them, and move capital into higher growth and return opportunities.”
The shares slid as much as 4.3% in London, the most in more than 2 1/2 years. Any writedown could wipe out some of the investment made during Flint’s tenure, when the bank said it would spend about $17 billion updating its technology platforms and expanding its business in mainland China.
“You are likely to see us needing to revisit a few things,” Chief Financial Officer Ewen Stevenson said on a call with Bloomberg. “We are carrying a decent amount of goodwill against parts of the European business in particular,” and there may be “some investment spent, for example in information technology, that we need to write off.”
HSBC’s pretax profit fell 12% to $5.3 billion for the third quarter. It dumped its target for return on tangible equity, a key measure of profitability, of more than 11% in 2020. Retail banking and wealth management saw a 18% drop to $1.69 billion.