HSBC doubles revenue boost from savings plan

HSBC HAS doubled the annual revenue boost expected from its turnaround plan to $2 billion, as Europe’s biggest bank picks 22 markets to drive its growth while eyeing more cost cutting to cope with new regulations in the wake of the financial crisis.

Yesterday, chief executive Stuart Gulliver said HSBC was on target to meet profitability and cost-savings targets, one year into a three-year recovery plan.

He said his biggest external worry “is absolutely how the euro zone plays out, and whether Greece stays in, whether firewalls are high enough to protect Spain and, frankly, whether markets take things into their own hands before June 17th”, when Greece holds new elections.

Mr Gulliver wants to streamline HSBC and focus more on its fast-growing Asian markets. It faces regulatory pressure to reduce its risks and has conceded it has more work to do to revive its lagging European and US businesses.

Analysts said the update was reassuring, but think hitting cost targets will be a challenge. “HSBC should come out and be honest about it. In reality, there was a force majeure in Europe blowing up, and they will need more than three years to meet their targets,” said Mizuho Securities analyst Jim Antos in Hong Kong.

The bank has achieved annualised cost savings of $2 billion, absorbing $1.2 billion of wage inflation in emerging markets and $400 million of extra regulatory costs last year. It expects savings to rise to $3.5 billion by 2013.

HSBC has sold 28 businesses, taking 15,000 staff off its payroll, and releasing about $55 billion in risk-weighted assets, the bank said. The sales brought in $5.9 billion. A return to higher interest rates will substantially boost revenues, Mr Gulliver said.

Having focused on shrinking the bank, Mr Gulliver is also attempting to show the bank’s growth potential. In addition to its core “home” markets of Britain and Hong Kong, he identified 20 priority growth markets, including China, India, Indonesia, Germany, Turkey, the United States and Brazil. Those markets account for about 92 per cent of group profit.

HSBC, with 89 million customers in 85 countries, has been accused of “planting flags” globally without enough attention on economic returns. – (Reuters)