HSBC Holdings Plc, Europe’s largest bank by market value, cut 1,100 jobs in its global banking and markets division as the deepening financial crisis threatens to extend a decline in profit.
The reductions in the division’s back-office operations amount to about 4 per cent of HSBC’s wholesale banking workforce, Hong Kong-based spokesman Gareth Hewett said in a phone interview. Global banking and markets includes corporate and investment banking, and markets operations.
HSBC is adding to the about 120,000 financial jobs lost worldwide since the global credit crisis began just over a year ago, leading to more than $520 billion of writedowns and credit losses. The London-based bank last month posted its steepest profit decline since 2001 on sub-prime mortgage losses.
“The financial sector is facing revenue pressure everywhere, and on jobs,” said Sunil Garg, Hong Kong-based head of Asian financials research for JPMorgan & Chase Co. “Everybody is trying to right-size their business.” About half the job reductions were in the UK, Hewett said. The bank trimmed around 100 jobs in Asia, he said. About 450 of the jobs lost were contract positions. HSBC has 335,000 employees.
“We’re taking these steps in the light of the current global business and economic environment and our cautious outlook for 2009,” Hewett said. “Markets continue to be challenging and difficult but our strategy leave us well positioned for the next wave of global growth, when it comes.”
Early Victim: HSBC’s Hong Kong-traded shares rose 0.3 per cent at 10.25 am local time.
The wholesale banking division accounted for about a quarter of HSBC’s pretax profit in each of the last three years, data compiled by Bloomberg show. The unit’s pretax profit fell 35 per cent to $2.7 billion in the first half from a year earlier.
HSBC was one of the first global banks to get burned by the surge in defaults on risky US home loans that ultimately evolved into a credit-market rout. The bank said in February 2007 that loan-loss provisions would exceed analyst expectations. In September last year, HSBC announced it was shutting down its Decision One sub-prime mortgage unit and eliminating 750 jobs.
As the credit-market meltdown unfolded, HSBC has emerged in better shape than some competitors. Citigroup Inc has cut more than 14,000 jobs and posted three straight quarters of losses. UBS AG of Switzerland has shed 7,000 employees as writedowns led to losses in the past four quarters.
Shares Outperform: HSBC has gained 4.6 per cent this year in London trading, compared with a 20 per cent drop in the FTSE ASX Banks Index. Citigroup lost 34 per cent and UBS tumbled 55 per cent.
HSBC has raised $5.1 billion of capital and reported $27.4 billion of writedowns and credit losses since the beginning of 2007, according to Bloomberg data. Citigroup raised $49 billion and $28.3 billion respectively to shore up their balance sheets.
Banks and securities firms may step up job reductions after this month’s Wall Street upheaval, which saw Lehman Brothers Holdings Inc go bankrupt, Merrill Lynch & Co sell itself to Bank of America Corp and American International Group Inc get taken over by the US government.
Washington Mutual Inc was seized by regulators today in the biggest banking failure in US history. JPMorgan Chase & Co will buy WaMu’s deposits for $1.9 billion after the government shut down the Seattle-based bank amid customer withdrawals of $16.7 billion since September 15, according to the Office of Thrift Supervision. WaMu had “insufficient liquidity” and was in an “unsound” condition, the OTS said.
Paulson’s Plan: Wall Street fired employees last month at the slowest pace in a year, according to Chicago-based placement company Challenger, Gray & Christmas Inc. That was before the two weeks of calamity that effectively put an end to the investment bank as a standalone business model.
Concerns that Congress will fail to pass Treasury Secretary Henry Paulson’s $700 billion plan to remove illiquid mortgage securities from the banking system has weighted on stocks this week and caused money market rates to soar, as banks began hoarding cash.
“If Congress doesn’t approve the rescue package, I think I’ll take up farming,” Australia & New Zealand Banking Group Ltd Chief Executive Officer Mike Smith said yesterday. “Congress has got to understand exactly how important this is to the US economy. There is no choice.”
