HSBC's new CEO plans $300m savings by streamlining senior management

HSBC's newly appointed chief executive, Georges Elhedery, is reportedly formulating cost-cutting strategies that could potentially save Europe's largest lender up to $300m (£229m) by trimming top management layers. According to the Financial Times, Elhedery, who succeeded Noel Quinn on 2 September, is considering merging HSBC's commercial banking unit with its global banking and markets unit.

This merger is expected to streamline upper management layers, impacting senior bankers and larger roles as the bank, which employs 214,000 people, aims to eliminate redundancy in its top ranks. An announcement is anticipated before the end of October, as reported by City AM.

HSBC is scheduled to report its third-quarter results on 29 October. It has been suggested that the bank may appoint Surendra Rosha, co-chief executive of its Asia-Pacific business, to oversee commercial and global banking and Patrick George, global head of markets and securities services, to manage the markets business.

When approached by City AM, HSBC declined to comment. The London-based banking giant has benefited from a significant earnings boost due to higher interest rates in recent years, reporting a record pretax profit of $30.3bn (£24.0bn) in 2023.

However, HSBC now faces the possibility of reduced profits as central banks worldwide lower borrowing costs.

While Elhedery's vision could lead to a significant restructuring, the projected savings of $300m (£229m) would only represent a small fraction of HSBC's reported costs of $16.3bn (£12.5bn) in the first half of 2024, which marked a five per cent increase year on year.

The bank has been under pressure due to rising costs, prompting analysts to suggest that HSBC needs to cut around $2bn (£1.5bn) in expenses over the coming years to maintain its current efficiency ratio, a crucial profitability indicator.

Under Quinn's leadership, HSBC significantly reduced its global presence, focusing more on Asian markets where it has a substantial scale. The bank withdrew from retail markets in the US and France and completely sold off its banking operations in Canada and Argentina.

Elhedery has continued this strategy, overseeing the sale of HSBC's German private banking division to French lender BNP Paribas.

Just before he assumed his role, HSBC announced the exit of three top executives as part of extensive changes to the bank's management following a review by Elhedery. These changes came into effect at the beginning of this month.