HSBC Scraps Target for Profitability -- WSJ
October 29 2019 - 3:02AM
Dow Jones News
Earnings fall as CEO sees restructuring ahead with pullback in
European operations
By Margot Patrick
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (October 29, 2019).
LONDON -- HSBC Holdings PLC abandoned one of its main financial
targets for 2020 and said it would embark on a new round of
restructuring as tougher market conditions hit its third-quarter
earnings.
Net profit fell 24% in the quarter, to $2.97 billion, the bank
said Monday. A FactSet poll of analysts had expected a net profit
of $3.96 billion for the quarter.
Noel Quinn, who has been interim chief executive since August,
said Monday that the bank needs to simplify its structure further
and revamp its operations in the U.K., Europe and the U.S. That
would mean pulling back in commercial banking and investment
banking in the U.K. and Europe and investing more in higher-growth
areas such as Asia, the Middle East, Mexico and Canada, he said in
an interview. on Monday
The bank is already acting on plans to sell its large French
retail business.
HSBC shares fell 3% in European trading as analysts said the
plans added new risks around timing and execution.
Mr. Quinn said he has dropped the bank's 2020 target to make at
least an 11% return on tangible equity and said plans are being
accelerated to "remodel" the lagging units and free up capital to
put elsewhere.
New financial targets will be set at full-year results in
February, if not sooner.
As a result, HSBC said it expects to take significant charges in
the fourth quarter and beyond, including the possible impairment of
goodwill and severance costs for departing staff.
Mr. Quinn didn't say how many of the bank's 238,000 jobs might
be cut but said HSBC continues to hire in Hong Kong and mainland
China.
HSBC has operations in 65 countries but makes around one-third
of its revenue in Hong Kong, where it was founded in 1865.
It aims to continue its dominance in that banking market and,
over time, grab market share from Chinese banks on the
mainland.
Mr. Quinn replaced former CEO John Flint after the bank's board
decided it needed a leadership change to address worsening economic
conditions. The board is undertaking a global hunt for a new CEO
and Mr. Quinn said Monday that he hopes to take the job
permanently.
John Cronin, a banking analyst at Goodbody Stockbrokers, said
Mr. Quinn's handling of the job so far has been impressive, but he
expects the bank's board will ultimately bring in an outsider to be
CEO -- breaking with 150 years of tradition.
The search is being led by Chairman Mark Tucker, who has sought
to introduce fresh thinking at the bank.
HSBC has long had a reputation for being slow-moving and
bureaucratic. On Monday, Mr. Quinn said the bank is still overly
complex and that head count could come down in management and
support roles across the group.
The latest changes come after HSBC recently completed a
yearslong restructuring that saw it exit from about 20 countries
and dozens of businesses. Mr. Quinn said the earlier reorganization
was more of a "risk management" program, while the current plans
would help free up capital to invest in technology and adapt
quickly to changes in the bank's markets.
--Yifan Wang contributed to this article.
Write to Margot Patrick at margot.patrick@wsj.com
(END) Dow Jones Newswires
October 29, 2019 02:47 ET (06:47 GMT)
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