Career & Jobs

This May Be A Harbinger Of What’s To Come

HSBC, the behemoth international bank, announced it will reignite its prior plan for a massive 35,000 job cut. The layoffs were originally slated to start back in February, but HSBC placed the layoffs on hold during the Covid-19 pandemic. In light of the current challenging business climate, coupled with falling profits, the bank claims that it has to act now to rein in costs. HSBC will also enact a firm-wide hiring freeze.

Noel Quinn, the bank’s chief executive officer, sent a memo to his 235,000 employees writing, “We could not pause the job losses indefinitely—it was always a question of ‘not if, but when.’”  Quinn was forthright in stating, “You will have seen that our profits fell in the first quarter, and virtually all economic forecasts point to challenging times ahead.” The CEO somberly added that the layoffs, which were first planned for February, are “even more necessary today.” “Since February, we have pressed forward with some aspects of our transformation program, but we now need to look to the long term and move ahead with others, including reducing our costs,” said Quinn. 

The bank has faced serious headwinds. Its pre-tax profit plunged 48% to $3.2 billion in the first quarter and it had to set aside billions of dollars for potential losses associated with the Covid-19 pandemic. HSBC has deep roots in Hong Kong, dating back to 1865. This has been very profitable; however, the bank found itself in the midst of geopolitical maelstrom, caught in between China’s new aggressive stance over Hong Kong. 

Quinn was unable to offer anxious employees a “unified timetable” regarding the exact timing of the downsizings. He did allude to the hope that most employees may remain or get paid for the rest of the year. The chief executive said, “Everyone who leaves will be offered support on searching and applying for jobs and preparing for interview.” 

Interestingly, HSBC anticipates that a large amount of workers will leave on their own volition and attrition will take care of 25,000 roles. This seems somewhat unrealistic, as the job markets in the United States, United Kingdom and Asia are not faring too well—to say the least. It doesn’t seem likely that there will be enough new jobs available to attract thousands of HSBC people who want to leave ahead of being axed.  

 Another question raised by some is why HSBC reported that it will maintain its dividend payments to shareholders. The bank could save a fair amount of money if dividends were cut or a moratorium was placed on the payouts. If this was enacted, it’s reasonable to believe that jobs could be saved.   

Back in February, HSBC initially announced the cutting of around 35,000 jobs, as its profits plunged by about a third in 2019. The bank had already conducted several rounds of layoffs, reducing headcount by 4,000 and then another round of roughly 10,000. To reduce costs by $4.5 billion and restructure the sprawling global bank, a company spokesperson said that HSBC planned to radically reduce its global headcount by about 15% over the next three years—about one in every seven people.  

The rapid decline in profits—about $7.3 billion—was attributed to write-offs related to HSBC’s investment and commercial banking divisions in Europe. HSBC had confronted a number of issues, including falling interest rates that make it hard for banks to be profitable, unrelenting protests in Hong Kong, uncertainty surrounding the outbreak of the coronavirus, concerns about the effects of Brexit and other geopolitical and economic events. These circumstances have only worsened over the last three months.

 HSBC also sought to replace staff with technology and cull middle management, as it consolidates international divisions. Its U.S. bank branch network was targeted for a 30% reduction.  

HSBC was not alone in this endeavor. A number of top-tier global banks, such as Morgan Stanley, had been pruning staff with downsizings—serving as a hedge against a possible downturn in the economy. Other banks collectively announced about 60,000 layoffs. Deutsche Bank planned to downsize 18,000 employees. Citigroup dropped the ax on hundreds of trading-related professionals. HSBC added to the gloom on Wall Street by cutting 14,000 jobs over several rounds. Barclays let go of 3,000 jobs, Société Générale eliminated 1,600 jobs and other banks as well. 

These job reductions all occurred pre-Covid-19. Since then, the global economy has been hit hard. In America, over 40 million people applied for unemployment benefits since mid-March. A number of high-profile, iconic companies, such as J.C. Penney, Hertz, Neiman Marcus, Pier 1 and J. Crew, filed for bankruptcy protection. Unfortunately, in a much more dour environment, HSBC’s job cuts may be a harbinger of what’s to come next for banks and white-collar jobs in other sectors.

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