Goldman downgrades HSBC over investment banking restructure

HSBC sign

Goldman Sachs has downgraded HSBC to neutral from buy because its decision to cut assets from its investment bank, without exiting underperforming businesses, will reduce revenue more than costs.

Bloomberg News reports that HSBC opted to restructure rather than sell its Mexican and U.S. consumer divisions, indicating the bank doesn’t plan to make more major regional disposals, which are key to improving the bank’s returns, Goldman Sachs analysts led by Martin Leitgeb said in a report Tuesday. 

'HSBC delivered on the size of the cuts, but we see these as more focused on capital optimization than on exiting specific sub-scale businesses', Leitgeb said. 'We see the risk of earnings implications, as it is much more challenging for HSBC to offset potential revenue attrition with cost reductions in the investment bank'.

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

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