Weaker revenues and a bleak economic outlook are compelling global banks to intensify cost-cutting efforts. And banks seem to have a unanimous agreement on the strategy to achieve this -- layoffs. HSBC
The game plan
The European banking giant plans to cut 30,000 jobs worldwide and sell off 195 retail banking branches in the U.S. -- almost half of the total retail branches it has in the country. This is part of HSBC's strategy to improve profits by reducing costs $2.5 billion to $3.5 billion over the next two years. The bank has already slashed about 5,000 positions through the year and is hinting at further job cuts.
Restructuring of operations in countries such as the U.S, the U.K., and other European countries is part of HSBC's plan to focus more on the Asian market at the moment. The bank anticipates growth in the U.S. and Europe to remain slothful, owing to the debt chaos and government cuts in spending. HSBC is selling 195 retail banking branches in the U.S to First Niagara Bank
Trends across the industry
In fact, this mass culling seems to be a general trend across the industry. After reporting a 33% dip in profits, Barclays
The Foolish bottom line
Plagued by the sluggish economy, weak loan demand, and European budget cuts, HSBC is desperately cutting costs. It has also decided to sell off its credit card unit as part of its cost-cutting initiative.
While divesting its noncore businesses to streamline its operations looks like a plausible move, cutting such a significant number of jobs appears short-sighted. The bank is looking to faster-growing markets to cope with weaker revenue. This might help in improving numbers in the short run, but it cannot rely on layoffs forever.