* 2019 profit before tax $13.35 bln vs $20.03 bln estimates
* Profit impacted by goodwill impairment of $7.3 billion
* Sets return on tangible equity target of 10-12% in 2022
* Says on track to appoint new group CEO
(Adds investment banking restructuring comments; earnings
details)
By Sumeet Chatterjee and Lawrence White
HONG KONG/LONDON, Feb 18 (Reuters) - HSBC Holdings PLC
said on Tuesday it would shed $100 billion in assets,
shrink its investment bank and revamp its U.S. and European
businesses in a drastic overhaul that will mean 35,000 jobs cut
over three years.
The bank, which has struggled to keep pace with leaner and
more focused rivals, is seeking to become more competitive as it
grapples with slowing growth in its major markets, the
coronavirus epidemic, Britain's European Union exit and lower
central bank interest rates.
In the latest in a series of overhauls since the 2008
financial crisis, HSBC said it would merge its private banking
and wealth businesses, axe European stock trading and cut U.S.
retail branches as it seeks to remove $4.5 billion in costs.
"The totality of this program is that our headcount is
likely to go from 235,000 to closer to 200,000 over the next
three years," Noel Quinn, interim chief executive, told Reuters.
The restructuring, one of the largest undertaken by a blue
chip lender for more than a decade, will be partly managed
through natural attrition as people leave the bank, he said.
The UK-based bank, whose huge Asian operations are
headquartered in Hong Kong, said the coronavirus epidemic had
significantly impacted staff and customers. In the long run it
could reduce revenue and cause bad loans to rise as supply
chains are disrupted, Quinn said.
The virus has killed almost 1,900 people, overwhelmingly in
mainland China, and infected more than 70,000, while its
economic impact is spreading across the globe.
HSBC veteran Quinn is auditioning for the permanent role of
CEO, which the bank said in August would be announced within six
to 12 months.
"In one sense, they are doing the things that were obvious
and had been called out by many, so it's good," Hugh Young,
managing director at Aberdeen Asset Managemement Asia, one of
HSBC's 20 largest investors said.
"Getting this done will require a fair amount of work, then
we need to see how it settles down. Noel is doing a good job in
very difficult circumstances," he added.
Europe's biggest bank by assets, which makes the bulk of its
revenue in Asia, said profit before tax tumbled by a third to
$13.35 billion in 2019, far below the average estimate of $20.03
billion from brokerages compiled by the bank.
That was due to $7.3 billion in write-offs linked to its
global banking and markets and commercial banking business units
in Europe.
In the United States, where the bank has underperformed for
years, HSBC said it would close around a third of its 224
branches and target only international and wealthier clients.
The lender's shares were down 3.7 percent at 568 pence at
the London market open.
NO BUYBACKS FOR 2 YEARS
HSBC, which has bought back some $6 billion of its own
shares since 2016, said it would suspend buybacks for two years
in order to pay for the restructuring but would maintain its
dividend.
The bank's return on tangible equity (RoTE), a key
profitability measure, is expected to be in the range of 10% to
12% in 2022. HSBC reported a RoTE of 8.4% for last year, down
from 8.6% in 2018.
HSBC said it planned to invest more than $100 billion in
"higher returning areas", resulting in broadly flat assets in
value terms over the three years. It also expects to incur
restructuring costs of about $6 billion, the bulk of it in this
year and the next.
While strengthening its investment banking capabilities in
Asia and the Middle East, the bank will maintain a global
investment banking hub in London, reducing its European
footprint for the business.
The bank will also reduce its sales and research coverage in
European cash equities with a focus on supporting equity capital
market transactions, it said, confirming a Reuters report last
month regarding pullback from the trading business.
Commenting on the impact of the coronavirus, Chief Financial
Officer Ewen Stevenson told Reuters the bank expected additional
loan loss provisions in the first quarter.
(Reporting by Sumeet Chatterjee in Hong Kong and Lawrence White
in London; Additional reportng by Anshuman Daga in Singapore;
Editing by Edwina Gibbs, Sinead Cruise and John Stonestreet)
HSBC Holdings (HSBA)