HSBC boss says global revamp is not a prelude to bank break up

HSBC's newly appointed chief executive, Georges Elhedery, has dismissed suggestions that his restructuring of the bank's operations between East and West is a precursor to the kind of break up demanded by one of its largest shareholders last year.

Speaking following HSBC's third-quarter results on Tuesday, Elhedery explained that the primary motivation for his overhaul "is to make us a simpler, leaner organisation with faster decision making, stronger empowerment of our frontline people being able to serve better our customers", as reported by City AM.

Elhedery, who succeeded Noel Quinn in September, has already made significant changes at the London-based bank, announcing a major restructuring of its global operations last week. Starting from next year, HSBC will be divided into four new divisions, including a merger of its global commercial and investment banking arms.

The bank's new businesses will also be categorised within separate Eastern and Western groups, reflecting the growing geopolitical tensions between China and the West. "We have simplified our regional governance structure, bringing it from five regions... down to two," Elhedery informed reporters.

"And we expect this to make it easier for our customers to deal with us because we will be more empowered and faster at delivering [for] them."

This geographical division of the group has been perceived as a partial victory for Chinese insurer Ping An, one of HSBC's largest shareholders.

The bank's push to separate its Asian operations did not achieve the anticipated backing from other investors during a shareholder vote last year. Despite this, the recently implemented structure has effectively established a sort of autonomous Asia business without the distinct stock market listing originally sought by Ping An.

However, Elhedery made it clear that this realignment should not be seen as a step toward a corporate division.

"This is not either a precursor, or an intent, or a preparation for any split," he clarified. "The global connectivity is a unique differentiation for us. Our customers see us as a major financial institution offering them distinctive capabilities in our global connectivity."

When questioned about whether he had engaged with Ping An regarding the bank's restructuring, Elhedery noted that HSBC consistently communicates with all significant shareholders "in the regular course of business" He chose not to disclose details on any "specific conversation".

As a substantial foreign-owned financial establishment operating in China, HSBC has frequently had to manoeuvre through controversies linked with the communist-led nation.

Criticism was directed at the institution for endorsing China's suppressive actions against the pro-democracy demonstrations in Hong Kong during 2020, and it has also been accused of freezing the bank accounts of activists.

On the topic of job reductions, Elhedery acknowledged his intentions to lower expenses and concentrate on key sectors within Europe's largest bank, as declining interest rates put pressure on profit margins.

He affirmed on Tuesday that the company's reorganisation will indeed result in job cuts among HSBCs senior banking personnel.

Elhedery remarked on the upcoming changes, "There will inevitably be some de-duplication of governance, and therefore there will inevitably be a reduction of senior roles in the organisation some senior roles in the organisation."

He also noted that organisational decisions would be made in the coming months to clarify outcomes, with a commitment to act swiftly: "We will be making organisation decisions over the course of the next few months to clarify the outcomes, and we will do so at pace."

While details on job cuts and restructuring charges are yet to be disclosed, HSBC plans to reveal more information during its annual results presentation in February. Elhedery expressed confidence in the financial benefits of the restructuring: "Our current analysis shows that we expect net benefits from this exercise, with any upfront costs more than compensated for through a short payback period afterwards," adding, "This is a matter of months, not years. We do expect the payback period to happen in a short timeframe, mostly during the course of 2025."