May 24, 2024

DealBook: HSBC Aims for $3.5 Billion in Savings, Trimming Retail

HSBC said Wednesday that it plans to cut costs by as much as $3.5 billion over the next three years to improve profitability, which it said could be hurt by stricter financial regulation.

HSBC, one of Europe’s biggest banks, said it will focus on commercial banking activities and wealth management while scaling back its retail banking operations to the most-profitable countries.

‘‘This is not about shrinking the business but about creating capacity to re-invest in growth markets and to provide a buffer against regulatory and inflationary headwinds,’’ the chief executive Stuart Gulliver said. He was expected to give more details about the plan when he meets investors later on Wednesday.

HSBC is not alone among banks seeking to streamline at a time when new financial regulations force them to hold on to more of their capital, resulting in pressure on profitability. The Barclays chief executive Robert E. Diamond said in February that he would review businesses and close some that do not generate enough return.

HSBC, which has already decided to withdraw from Russia’s retail banking market, said it would test all of its operations and businesses for profitability and a set of other criteria. The bank also set a target for its cost efficiency ratio of 48 percent to 52 percent.

HSBC surprised some investors on Monday when it said that costs as a proportion of income rose to 60.9 percent in the first quarter from 49.6 percent in the first three months last year. The higher costs overshadowed a 58 percent increase of net income in the quarter.

The London-based bank, which generates about half of its profit in Asia, weathered the financial crisis better than many of its rivals and did not have to ask for financial help from the government. But its share price started to lag behind that of Deutsche Bank, JPMorgan and Barclays this year as some investors raised concerns about rising costs and the pace of growth.

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