Elhedery's Challenge: Growth Instead of Cost-Cutting at HSBC

In the halls of the HSBC offices, the new CEO Georges Elhedery keeps his plans for significant cost savings of around 300 million dollars firmly in mind. According to information from the Financial Times, higher management levels are predominantly affected, potentially impacting the London headquarters rather than customer-facing positions worldwide. However, these savings are merely the tip of the iceberg of challenges facing the bank. Elhedery is considering merging two of HSBC's three business sectors: the commercial banking division and the global banking and markets unit. In the first half of 2024, the commercial banking department generated 39% of the group’s revenue, while the global banking department contributed 23%. There are overlaps in customers and products, which could lead to savings in risk teams and the upper management level by combining these areas. However, the move carries risks. Jane Fraser of Citigroup, who recently reversed a similar restructuring, emphasized the importance of accountability through a closer connection between business unit leaders and the CEO. Additionally, transparency for investors could suffer as they assess the performance of such a broadly configured unit. Moreover, the modest savings will hardly alleviate Elhedery’s main concern—declining interest rates. Forecasts suggest that net interest income will noticeably decrease due to lower rates from central banks. To counteract this, Elhedery needs to find ways to strengthen other revenue streams, such as asset management. Cost control plays only a secondary role at HSBC.