What’s Going On Here?HSBC’s iconic towers will soon be emptier: according to reports on Monday, Europe’s biggest bank will shortly trim 10,000 jobs. What Does This Mean?HS’s-Big-Costs have weighed on the bank for a while, particularly in Europe: a quarter of its employees are there, despite HSBC making a loss in Europe in each of the past two years. After its former CEO was fired in August for… not firing people, HSBC’s new boss has immediately got to work and plans to slash almost 5% of HSBC’s 238,000 jobs.
HSBC’s shears aren’t quite as big as it sounds, however: some 4,000 of the cuts will come from selling off its French retail bank (think: savings and loans). And HSBC plans to keep hiring in Asia, where it makes nearly 90% of its profits. Though with most of that hailing from Hong Kong, its earnings might shrink – the region’s struggling economy has recently forced HSBC to lower fees. Why Should I Care?The bigger picture: It’s tough to be a banker.
Falling interest rates around the world have made it tough for global banks to turn a profit: low rates shrink the difference between what banks pay depositors and creditors, and what they make from loans. HSBC isn’t alone. In August, Deutsche Bank announced it’d fire 18,000 people – and over the weekend, American investment manager Invesco said it had cut 12% of its newly enlarged workforce, after buying rival OppenheimerFunds earlier this year.
For markets: Mind the gap between US and European banks.
Since the global financial crisis, US banks have grown their profits at a faster pace than their European rivals. Investors will see if that still holds true next week, when US banks reveal their third-quarter earnings and European banks follow in a few weeks’ time (tweet this). Expectations of American banks are low: earnings projections for both 2019 and 2020 have declined this year. Those forecasts could fall further: the US central bank might yet lower interest rates further this month. |
