HSBC expected to announce deeper cuts at investment bank

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'Extreme solutions'.

HSBC is poised to announce deeper cuts at its investment bank as part of a plan to revive profitability that CEO Stuart Gulliver will present next week.

Bloomberg News reports that foreign exchange and rates trading may be prioritized because they have the highest return on equity of any part of the investment bank and help HSBC service its corporate clients operating globally, said a person with knowledge of the matter, who asked not to be identified as the plans aren’t finalized.

The equities trading division has the lowest returns and should be the first in line for cuts, the person said.

Gulliver, 56, pledged in February that underperforming businesses would face 'extreme solutions' after annual earnings fell 17% and the lender cut its profitability targets. HSBC’s investment banking operation has an ROE of about 6% less than the lender’s 10% target.

'If cuts are coming it seems most likely that its sub-scale equities business could be a candidate', said Jonathan Tyce, senior banks analyst at Bloomberg Intelligence in London. 'FX, credit and rates go hand in hand with its client facilitation revenues, and must be core going forward'.

To access the complete Bloomberg News article hit the link below:

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