The boss of HSBC has said moves to separate its eastern and western operations are not part of a plan to break up the banking group, as he announced a $3bn share buyback amid better-than-expected profits.
Georges Elhedery pushed back against rumours that a huge restructuring plan announced last week was a sign he was considering hiving off parts of the banking group, which had been under pressure to do so by its largest shareholder, the Chinese insurer Ping An. Investors last year rejected Ping An’s proposals.
“This is not either a precursor or an intent or a preparation for any split,” the newly appointed chief executive told journalists on Tuesday. “Our customers see us as a major financial institution offering them distinctive capabilities in our global connectivity,” he added.
He made the comments as the London-headquartered bank reported a 10% rise in pre-tax profits to $8.5bn (£6.6bn) in the three months to the end of September, thanks to a strong performance in its wealth division and wholesale banking arm.
HSBC had been expected to report a 1.3% drop in profits to $7.6bn, according to average analyst estimates.
The stronger-than-expected performance has allowed Elhedery to acquire another $3bn worth of HSBC’s shares from shareholders, days after completing a separate multibillion-dollar buyback announced in July. He will hand a further $1.8bn to investors in the form of dividends.
Elhedery, who took over the top job last month, said: “We delivered another good quarter, which shows that our strategy is working.”
The bank said it put aside an extra $300m for banker bonuses so far this year, echoing guidance it issued in July, which said its top performers were likely to share a bonus pool worth as much as the $3.8bn handed out in 2023.
HSBC’s London-listed shares were up 4% on Tuesday on the back of the bumper third-quarter figures, making it the biggest riser on the FTSE 100.
The results came a week after Elhedery announced he would be dividing the bank’s operations into eastern and western markets, prompting rumours that the lender might eventually pursue a breakup like the one proposed by Ping An and hive off its more profitable Asian bank.
While HSBC is headquartered in London, it makes the bulk of its profits in Asia. Its geographic sprawl has caused tension in recent years, with western leaders admonishing executives for staying neutral over Beijing’s crackdown on democracy advocates in Hong Kong. Shareholders in China and Hong Kong had also been up in arms after UK regulators forced HSBC to halt dividends at the start of the Covid pandemic.
There was also speculation that Elhedery’s restructuring plan was driven by geopolitics, given that US elections next week may result in a second presidential term for Donald Trump. However, Elhedery insisted there were “no geopolitical reasons why we would we have done this”.
The chief executive confirmed he would be cutting jobs and letting go some of his most senior staff as he reorganised the bank. The lender employs about 213,978 staff worldwide, about 40,000 of which are in the UK.
“There will be senior roles being reduced due to the deduplication and the simplification we’re driving. And that’s the primary objective of this reorganisation,” Elhedery said.
He stopped short of providing numbers, but said HSBC would give more detail on the “costs and benefits” in February. “These will be … in dollar numbers, not in headcount. We do not specifically target headcount,” he added.
It follows a previous overhaul by former HSBC chief executive Noel Quinn, who in 2020 unveiled plans to cut up to 35,000 jobs by 2022.
Elhedery also used his call with journalists to throw his weight behind the new Labour government, a day before its inaugural budget on Wednesday.
“We’ve been really happy with the approach that the government has been taking, vis-a-vis growth and investment, and the opportunities we see both for domestic customers international customers who are looking at the UK as a great investment destination. So this is very encouraging,” he said.
“With regards to tomorrow[’s budget] I wouldn’t speculate on what may come … our mission is to support our customers … so we will continue to do so within the scope of whatever rules or regulations that will be implemented.”
