HSBC Holdings Plc, faced with surging costs for salaries, plans to eliminate 30,000 jobs by the end of 2013, about 10 percent of the staff at Europe’s largest bank.
A bigger workforce and wage inflation helped drive costs to 57.5 percent of revenue in the first half from 50.9 percent a year earlier, London-based HSBC said Monday in a statement. That’s more than the 48 percent to 52 percent target range set by HSBC, which posted a 36 percent increase in profit for the first six months of 2011.
“The market is likely to interpret the job cuts in a positive way,” said Neil Smith, a banking analyst at WestLB AG in London. “HSBC needs to keep their costs under control.”
HSBC aims to reduce expenses by as much as $3.5 billion over the next two years as it tackles wage inflation in faster- growing economies and prepares for stricter capital rules. Credit Suisse Group AG, UBS AG, Bank of America Corp. and Goldman Sachs Group Inc. are also cutting payrolls as investment banking revenue weakens.
European banks have slashed 230,000 jobs since the start of the financial crisis in 2007, according to Bloomberg Industries.
HSBC gained 2.2 percent to 607.5 pence in London trading, the biggest advance in the Bloomberg Europe 500 banks index.
The cuts will affect “support staff where we believe we have created an unnecessary bureaucracy in this firm over a number of years,” said Stuart Gulliver, chief executive officer.
HSBC already has cut 5,000 of the jobs and may hire 3,000 to 4,000 people a year in emerging markets, Gulliver told journalists. The 30,000 jobs exclude employees leaving when assets are sold, he said. The target doesn’t take into account cuts that could follow the U.K. Independent Commission on Banking’s report in September, Gulliver said. The panel may force lenders to separate consumer and investment banking units.
HSBC’s cost-income ratio is “middle-of-the-road, but it’s a large global bank that should be able to benefit from scale economies,” said Gary Greenwood, a banking analyst at Shore Capital in Liverpool.
Unite, a British trade union, described the restructuring as “brutal” and said it was unfair that employees were paying for a banking crisis for which they were “in no way responsible.”
HSBC, the first British bank to report earnings for the first half, said profit rose to $9.22 billion from $6.76 billion a year earlier. That beat the $7.82 billion median estimate of seven analysts surveyed by Bloomberg.
Pretax profit at HSBC’s European unit tumbled 39 percent to $2.15 billion. The region accounted for 19 percent of HSBC’s profit in the first half, compared with 32 percent a year ago.
Pretax profit at the lender’s global banking and markets unit, which includes investment banking, fell 12 percent to $4.81 billion, hurt by its fixed-income business in Europe as the continent’s sovereign debt crisis forced Greece to accept a second bailout. Total operating revenue at the unit fell to $9.7 billion from $10.4 billion as the bank suffered “weaker” credit and rates trading revenue in Europe, it said.
Provisions for bad loans in the North American business fell to $3 billion from $4.55 billion, HSBC said.
HSBC agreed to sell its upstate New York branch network, comprising almost half its U.S. outlets, to First Niagara Financial Group Inc. for about $1 billion as it pares operations in North America. The bank also plans to sell its U.S. credit- card business. HSBC sold part of its Russian consumer banking unit last month and on July 28 said it will close its 10 branches in Poland, where it employs 263 people.
The bank acquired U.S. subprime mortgage lender Household International, now known as HSBC Finance, for $15.5 billion in 2003. HSBC has since halted consumer-finance lending at the unit and recorded more than $63 billion of provisions in North America, according to data compiled by Bloomberg.
The proportion of profit HSBC gets from its Asian, Latin American and Middle Eastern businesses rose to 76 percent in the first half, from 64 percent in the same period last year, the bank said.
“We remain positive on the outlook for emerging markets,” the company said. “We expect a soft landing in China and we believe Hong Kong is well-equipped to mitigate overheating pressures.”
In its consumer banking division, HSBC will focus on the U.K., Hong Kong, high-growth markets such as Mexico, Singapore, Turkey and Brazil, and smaller countries where it has a leading market share, Gulliver told shareholders in May. It plans to boost revenue at the unit by $4 billion in the near-to-medium term, the bank said at the time.
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