HSBC Plans Possible Merger of Business and Investment Banking Units to Cut Costs

9/10/2024, 11:01 AM

HSBC is considering a merger of the commercial and investment banking divisions to reduce costs and streamline management structures under CEO Georges Elhedery.

Eulerpool News Sep 10, 2024, 11:01 AM

HSBC considers a significant structural change under the new leadership of CEO Georges Elhedery. According to people familiar with the plans, the bank's management has discussed merging the commercial banking division with the Global Banking & Markets (investment banking) division. This move would be a major step for Elhedery, aiming to increase efficiency and reduce costs.

The business banking division accounted for 35 percent of total revenue last year, while investment banking contributed 24 percent, according to the bank's latest annual report. A merger could allow Elhedery to streamline management levels and tighten the cost structure. Additionally, he plans to strengthen the focus on fee-generating business areas such as asset management to offset declining interest income.

Although the discussions have already taken place, there is no guarantee that the merger will actually be implemented, according to two people familiar with the matter.

This merger plan was announced after HSBC revealed last month that Barry O’Byrne, previously head of commercial banking, will take over the wealth and personal banking division. Nuno Matos, the former head of this division, is leaving the bank. O’Byrne’s successor in commercial banking has not yet been named, with Jo Miyake temporarily filling the position.

Cost reductions are the top priority for Elhedery, who recently took over leadership. Despite a promise from former CEO Noel Quinn to reduce the number of employees to 200,000, this figure remained unchanged by the end of last year. In the second quarter, HSBC's expenses rose by three percent to $8.1 billion, partly due to higher technology spending and inflation.

Both commercial banking and investment banking encompass financing and payment services, with the investment sector serving larger clients.

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