HSBC Holdings Plc, which plans to eliminate 30,000 jobs globally by the end of 2013 to curtail surging salary costs, said a “war for talent” in Asia will drive up compensation for bankers in region.
“The turnover in Asia-Pacific for every bank, for the industry, is quite high,” Peter Wong, chief executive officer for London-based HSBC’s operations in the region, said in an interview today. Rising salary levels, bolstered by an average 18 percent attrition level, “will always be an issue,” he said.
HSBC Chief Executive Officer Stuart Gulliver yesterday said he plans to trim 10 percent of staff at Europe’s largest bank after a bigger workforce and wage inflation helped drive up costs, while hiring 3,000 to 4,000 people a year in emerging markets. Rivals Credit Suisse Group AG, UBS AG, Bank of America Corp. and Goldman Sachs Group Inc. are also trimming payrolls.
“For international banks, the story should be cutting staff in the west while adding people here in Asia,” Dominic Chan, a Hong Kong-based analyst at BNP Paribas SA who rates HSBC a “buy,” said by telephone this week. “If HSBC is to improve its cost-to-income ratio, it must make some efforts in Europe.”
European banks have slashed 230,000 jobs since the start of the financial crisis in 2007, according to Bloomberg Industries.
HSBC gained 1.8 percent to HK$78.35 as of 2:46 p.m. in Hong Kong trading, making it the best performer on the benchmark Hang Seng Index today. It climbed 2.2 percent to 607.5 pence in London trading yesterday.
Expenses in Asia, home to the two fastest-growing major economies, accounted for 45.2 percent of income in the first half of the year, HSBC’s regional unit said in a statement yesterday. Costs for the parent company climbed to 57.5 percent of revenue from 50.9 percent a year earlier. That’s more than the 48 percent to 52 percent target range set by HSBC.
The bank’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.
Profit at HSBC, the first British bank to report earnings for the first half, rose 36 percent to $9.22 billion from $6.76 billion a year earlier, according to a statement yesterday. That beat the $7.82 billion median estimate of seven analysts surveyed by Bloomberg.
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.
The job cuts will affect “support staff where we believe we have created an unnecessary bureaucracy in this firm over a number of years,” Gulliver said.
HSBC has already started cutting 5,000 jobs, he said. The 30,000 jobs to be eliminated 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.
“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.”
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.”