Banks Fund Hiring by Slashing Jobs

At first it looked as if HSBC Holdings was just another bank planning layoffs. Yet the Aug. 1 announcement that it would eliminate 30,000 jobs by the end of 2013 cited an unusual rationale for the cuts: rising salaries. In particular, the intensifying battle for talent in places such as China and Brazil has pushed up wages and made it costlier to compete. For HSBC, Europe’s largest bank, one answer is to free up money to keep hiring in fast-growing markets by firing thousands of workers everywhere else.

HSBC has already shed 5,000 of the 30,000 it plans to cut. The layoffs, which will eliminate 10 percent of its workforce, come at a time when rivals also are trimming their payrolls. On Aug. 2, Barclays said it would cut 3,000 jobs this year. Credit Suisse Group, Bank of America, UBS, Goldman Sachs, and Morgan Stanley are reducing head count as well, though they all continue to hire in fast-growth areas such as emerging markets. Most have blamed the cutbacks on sluggish markets and new regulations that may curb profits even as they reduce risk. Efforts to clamp down on outsized bonuses, especially in the U.K., have also prompted banks such as HSBC to boost base salaries, which makes it costlier to support underperformers in tough times.