HSBC Holdings Plc unveiled a broad restructuring across different business lines and geographies as newly appointed CEO Georges Elhedery embarks on ambitious cost cuts at the banking behemoth.
The lender will combine its global commercial and institutional banking operations under Michael Roberts, according to a statement. It will also create a new International Wealth and Premier Banking business to be overseen by Barry O’Byrne.
As part of the new geographic set up, it will have an Eastern regional unit including Asia Pacific and the Middle East, and a Western market that includes non-ring-fenced bank in the UK, Europe and the Americas. It also made Hong Kong and UK standalone units.
“The new structure will result in a simpler, more dynamic, and agile organisation as we focus on executing against our strategic priorities, which remain unchanged,” Elhedery said in the statement.
The moves will cut the number of executives who sit on the newly named key operating committee to 12 from 18.
The shares slid 0.3% as of 1:46 pm in Hong Kong.
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HSBC also named Pam Kaur chief financial officer, making her the first female finance director in its 159-year history. She joined in 2013 as audit head before overseeing risk and compliance. “She is highly respected and well known to the board and was the unanimous choice,” Chairman Mark Tucker said in a statement.
Some key executives are leaving as part of the reshuffle. They include Stephen Moss, who runs Middle East and North Africa, along with its head of Europe - Colin Bell. Greg Guyett, the current CEO of global banking and markets, was named chair of the strategic clients group, a newly created role.
With central banks around the world beginning to cut interest rates, Elhedery has been under pressure to trim costs in order to protect the firm’s margins. He has asked staffers to be more careful with their spending and put fresh limits on travel by bankers.
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The new CEO has been seeking to find a way to shave off US$2 billion ($2.63 billion) in costs in order to keep a lid on the bank’s efficiency ratio, a key measure of profits which shows how much it costs to produce a dollar of revenue, according to Bloomberg Intelligence.
His appointment, effective last month, marks a rapid ascent for the Lebanon-born, French-educated banker, whose challenge now is to show that he can further grow Europe’s biggest bank.
With the moves, HSBC is following in the footsteps of Citigroup Inc., which also recently merged a bevy of its sector groups.
Merging the commercial and institutional banking divisions, which houses its investment bank ends a long-running debate within HSBC about how best to manage two of its largest and most important businesses. The proposal has faced internal resistance in the past and former HSBC CEO Noel Quinn was opposed to the idea, Bloomberg previously reported.
The Eastern region will merge the Asia business with the Middle East and be headed by David Liao and Surendra Rosha. Roberts will oversee the Western region.
“I have viewed HSBC’s global operations as too complex and too sprawling geographically,” said Michael Makdad, senior equity analyst at Morningstar. “This reorganization to simplify the business, and separate Hong Kong and the UK into their own businesses, should be positive. It may also help answer the concerns of shareholders in Asia, who argued a few years ago that such a separation could improve returns.”
