HSBC Restructuring: Massive worker cull may spill over in Middle East

HSBC’s official sources in Dubai declined to comment on the impact of the global downsizing on its staffing in the UAE and region.

Dubai — HSBC on Tuesday said it would reduce its head count by up to 50,000 as part of a global overhaul, a move that analysts fear would have its repercussions in the region.

The bank, which has a strong presence in the UAE and which has been operating in Dubai since 1946, said  the  global restructuring would entail its withdrawal from Brazil and Turkey, as well as shifting of its global headquarters from London to Hong Kong. HSBC is one of the oldest foreign banks with the largest branch network in the Middle East.

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“The global slashing of headcounts by as much s 50,000 by 2017 will leave the bank’s operations in the UAE and rest of the Middle East and North Africa region with no other choice but to follow suit, albeit in a less impactful way,” an industry  analyst said.

HSBC’s official sources in Dubai declined to comment on the impact of the global downsizing on its staffing in the UAE and region. In the Mena region, HSBC has over 250 branches and employs more than 8,000 full-time employees, just less than four per cent of its global workforce of 258,000 as of December 2014. In the UAE, which is one of its key priority markets, HSBC has eight branches.

In a statement to the Hong Kong stock exchange on Tuesday, HSBC said it expects the restructuring would save it $5 billion in annual costs within two years.

The bank said that it would refocus its business on Asia and is slicing the size of its investment bank, exiting Turkey and pulling back its franchise in Brazil. The moves would reduce the workforce at Europe’s largest bank by about 19 per cent over the next two years. Following the announcement, the bank’s shares fell one per cent in London.

The bank said that it would shrink its risk-weighted assets by about $290 billion, including cutting its global banking and markets risk-weighted assets to less than a third of the group’s assets.

HSBC also revealed plans to streamline its workforce and trim its branch numbers by around 12 per cent. The bank said it intended to sell its Turkish and Brazilian operations — although it will maintain a presence in Brazil to serve large clients — in what the it called a significant reshaping of its business portfolio.

The closures in Brazil and Turkey will alone see the bank’s headcount cut by 25,000 in addition to the other job losses.  Prior to this announcement, HSBC had cut its workforce by around 40,000 people since its cost-cutting purge began in 2011. The bank, which employed 295,000 people in 2010, targets to reduce the count to 208,000 by 2017.

“Brazil and Turkey have limited value to the franchise and that is why we have made the announcements we have today. These announcements prove there are no ‘sacred cows’ in the business,” HSBC chief executive Stuart Gulliver told investors on a conference call following its statement.

In the UK, Gulliver said the bank would likely cut 7,000-8,000 roles, which would occur as a result natural attrition, or employees leaving on their own accord.

Gulliver said that if the bank were to relocate its headquarters, as touted earlier this year, this would only result in around 250 job losses, meaning it would not be a “major employment issue”.

“We will make the decision towards the end of this year. If it was to leave the UK,  it would take another two years,” he said.

Being based in the UK, HSBC is forced to pay a bank levy that cost the lender £700 million last year ($1.07 billion). Gulliver has openly criticised the levy, introduced by UK chancellor George Osborne in 2010, as well as the requirement to create a ring-fenced UK high street arm. He cited the measures as the key issues over headquartering in London.

— issacjohn@khaleejtimes.com