HSBC CEO Says `Too Early' to See Deeper Investment-Banking Cuts

  • CEO says if trend deepens, bank will respond at half year
  • Unit's pretax profit was below estimates of Citigroup analysts

HSBC Holdings Plc, the U.K. lender eliminating 25,000 jobs to boost profitability, doesn’t plan to deepen cuts at its securities unit amid a market rout, said Chief Executive Officer Stuart Gulliver.

“It’s too early,” Gulliver said on a call with analysts this morning, when asked if he plans to trim costs further at the Global Banking and Markets business. “We haven’t finished the second month of the year. We need to see whether this trend deepens and if it does, then we’ll respond at the half year.”

Gulliver, 56, is shrinking operations at HSBC’s investment bank, which includes bond- and stock-trading operations, as part of a plan he laid out in June to cut as much as $5 billion in costs by the end of 2017. Global markets have since tumbled while a slowdown in the Chinese economy has further complicated the lender’s Asia-focused turnaround plan.

Investment banks around the globe have been hurt by tougher capital requirements and a slump in trading revenue. At Deutsche Bank AG, the securities unit slipped into a loss in the fourth quarter, while Credit Suisse Group AG reported a 35 percent revenue slump at the units housing trading, advisory and underwriting businesses outside of Switzerland and Asia.

‘Large Chunk’

HSBC’s investment bank, run by Samir Assaf, posted a pretax profit of $1 billion, compared with a loss of $85 million a year earlier, London-based HSBC said on Monday. Still, that’s 33 percent below the estimates of Citigroup Inc. analysts Andrew Coombs and Ronit Ghose, according to a note to clients.

In the fourth quarter, risk-weighted assets dropped 15 percent to $440.6 billion, while operating expenses declined to $2.4 billion from $3.3 billion a year earlier. Full-year revenue at the unit climbed 4.7 percent to $18 billion as sales from trading equities and products tied to interest-rates and currencies climbed, the bank said, without giving a quarterly performance breakdown.

“We’re committed to take out a very large chunk of our cost base and we’ll do that,” Gulliver said.

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