Why HSBC's plan is not great for those in product control
The good news if you work in HSBC's global banking and markets team is that redundancies seem unlikely, despite the targeted savings of up to $3.5bn across the group. Unfortunately, if you work in the back office, technology or finance, your job could be offshored.
The bank is looking to save between $80-110m by increasing the offshoring targets for its operations, IT and finance divisions within GBM. It plans to ship 35% of staff in technology, 40% in operations and 25% in finance to lower cost destinations.
HSBC is following the lead of other investment banks by offshoring more IT functions and consolidating trading platforms by 50%, as well as moving operations employees away from key financial centres.
By focusing on offshoring finance, however, it also raises the prospect of roles like product control moving away from more expensive destinations. We suspect Singapore, already an offshore hub for product control roles, could be the main beneficiary.
If HSBC's cutting costs in the back and middle office, it still plans to hire selectively for front office investment banking roles. In today's investment banking presentation, it said it wants to hire in equities for coverage, origination, sales, trading and research. FX and commodities have also been earmarked as growth areas.
Should HSBC be cutting more vigorously? Maybe. According to Financial News its return of equity for global banking and markets in Europe is just 11% (the same as its own estimated cost of equity), compared to 27% in Asia. Redundancies in Europe and recruitment in Asia would therefore seem apposite.
Despite this, HSBC said that it was developing GBM hubs in Paris and New York, as well as expanding in Germany. The focus, however, is definitely growth in Asia.
It expects it to constitute 45% of absolute growth within GBM going forward to 2013, and has conceded that staff costs will continue to accelerate in the region as competition drives up salaries.
Stuart Gulliver, chief executive of HSBC, said the bank was "not going to compromise on paying for talent" and would focus on managing down non-staff costs in the region.
