Fear holds sway at HSBC over whether the axe is about to fall

Georges Elhedery took a sabbatical from a senior leadership position at HSBC in 2022. At the time, many of the colleagues of the Lebanese-born banker thought his career was over.
They were wrong. After using his six-month break to add Mandarin to his roster of five languages, he returned to the bank and, within months, he was named finance director. Two years later, in September 2024, he took over as chief executive.
Until then, the French-educated banker had kept a low profile — but, as the holder of one of the biggest jobs in the global financial arena, he is now regular headline material in corporate Britain. As the boss of HSBC, he runs the third-largest company on the stock market — where it is valued at £125 billion — and one of the most global, with a presence in 60 countries and a workforce of about 220,000 people.
He is also, again, defying expectations. A shy and cerebral figure, many had thought that when Elhedery replaced Noel Quinn, he would be a continuity candidate, having worked at the bank since 2005 and been a key player in his predecessor’s regime.
Last week, it became clear that this was not the case. In east London, fear and uncertainty spread inside HSBC’s 45-storey skyscraper in Canary Wharf after Elhedery announced a management overhaul that raised expectations of painful job cuts, and revived questions about whether this banking behemoth should be split up between its operations in the West and the East.
As he embarked on the bank’s third attempt in 15 years to tame its sprawling, civil service-style bureaucracy, Elhedery announced a number of other changes. He is splitting the bank into two regional divisions — western and eastern markets — from five previously, while allowing high street retail banking operations in Hong Kong and the UK, run out of Birmingham, to stand in their own separate units.
He is also turning three other divisions into two, by merging the markets operations with the commercial banking business, and redesigning the arm of the bank known as wealth and personal banking, so that it becomes wealth and premier banking.
So on Tuesday, when Elhedery presents third-quarter results, he will face demands for information about his new look for the bank. Among the questions now swirling is whether the East-West divisional reorganisation is a sign that he wants to break up HSBC, or is it a new strategy and is he preparing to embark on a wave of cost-cutting?
After speaking to analysts, shareholders and insiders, what follows is an attempt to address some of the uncertainties.
Just as the Covid lockdowns were ending, the Chinese insurer Ping An, a major shareholder in HSBC, called for the bank to split itself in two, with its fast-growing Asian business being spun off. But after two years of acrimony, HSBC’s management team thought it had quashed this argument when investors voted against the idea last year. HSBC had insisted the bank would be more efficient and provide better service for its global clients if it stayed as it was.
But last week, another of its top 20 shareholders — a Florida-based fund called GQG Partners — said the future for the bank should “really be an eventual break-up”.
Two other top 20 investors, though, dismissed the idea and a senior insider at HSBC was clear that this was not Elhedery’s thinking: “That is categorically not what this plan is about. This concept that we can break East and West is just wrong.” An eastern division that covered an area as vast as the Middle East to Australia, they added, would not break up the bank in the way that Ping An might have envisaged.
HSBC has already dropped retail banking in the western side of its empire, apart from in the UK. So analysts have been wondering what lies in store for its high street operations elsewhere. Benjamin Toms, an analyst at Royal Bank of Canada, said: “At the moment, anything that is retail outside the UK or Hong Kong doesn’t seem to have a natural place.”
Other than in Britain and Hong Kong, HSBC seems to be moving towards focusing on “wealth management” — to help customers invest their money — rather than conventional high street banking.
“We want to be a ‘premier’ bank”, said the senior insider, hinting at the move away from retail banking. HSBC has already sold off its high street operations in China, while in India and the UAE, it has been held back by strict state limits on foreign bank branch networks.
“We can’t compete with high street banks in places like the UAE and India,” said the senior insider. Branches in those countries will be focused on wealth management for clients who bank internationally, such as expatriates and wealthy locals.
But that leaves questions about HSBC’s operations in Mexico, where it is still a serious high street player, which appear to sit uncomfortably in the West-East split.
Elhedery has taken over a bank that roared to a record profit of $30 billion last year, on $66 billion of revenues, but that was primarily thanks to rising interest rates in Britain and America. So, analysts and shareholders reckon, he is devising a plan for when rates come down.
As HSBC makes profits when interest rates are high from the difference between what it pays savers and charges borrowers, a reversal in the cost of borrowing could be painful. For every percentage point fall in rates, Toms explained, the bank stood to lose $2.7 billion, or 4 per cent, of revenue.
One way to maintain profits is to cut costs, and putting together the corporate and investment banking sides — which globally employ 45,000 people each — would “de-duplicate” some positions, according to the senior HSBC insider. That would cut costs but also speed up decision-making.
Elhedery is expected to resist putting a figure on the total number of jobs that will go, but he will focus on culling the big earners in the senior management. Four bankers have already been axed from his executive committee and more senior roles are also at risk from the new structure. So speculation that a multi-year, multibillion-pound restructuring was under way, seems wide of the mark, with the focus instead being on a short, sharp, simplification exercise.
After repeated sell-offs of operations and layoffs, HSBC’s headcount has fallen by 100,000 from its peak, before the global financial crisis 16 years ago, to 220,000 now. Little wonder speculation is rife that Elhedery is sharpening the knife again.
But according to the senior insider, Elhedery’s predecessors had done the worst of it, and he is now merely accelerating what they had set in train: “They took out the fat from the organisation — the parts of the flesh that were not needed for our competitive edge. We’re now changing the structure of the backbone. We had a skeleton to hold a 200lb gorilla, but the backbone — the infrastructure, the bureaucracy and the governance — has become just too heavy for the lean flesh. This is the natural conclusion. We’re going at the bones now.”