HSBC's $300m of cost savings imply the removal of 200+ investment bankers
Georges Elhedery, HSBC's new CEO is putting the finishing touches to his cost-cutting plan. The Financial Times reports that Elhedery intends to cut costs at the bank by $300m+ and that he will do so by cutting senior people and merging the commercial bank with the global banking and markets unit.
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The FT doesn't disclose how many people Elhedery is planning to eliminate in pursuit of the $300m in savings, but HSBC's recent annual report offers some pointers.
The categories in the pay section of HSBC's annual report don't entirely correlate with the names of its divisions 🤔, but as the chart below shows, the bank spent $713m paying 507 'material risk takers' working in investment banking last year. As we noted in February, this works out at around $1.4m each.
Material risk takers (MRTs) are senior managers and individuals able to take significant amounts of risk on behalf of the bank. As such, they would seem to fit the category of person that Elhedery is intending to cut.
However, in the investment bank, MRTs are also likely to generate revenues. If Elhedery wants to achieve a Citi-esque elimination of senior staff without impacting revenue generation, he could cut MRTs in retail banking, corporate functions, internal controls and 'other areas' instead. But the opportunities for saving there are considerably less. A difficult decision lies ahead.
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