HSBC Holdings has announced a broad restructuring across multiple business lines and geographies as newly appointed CEO Georges Elhedery begins an ambitious effort to cut costs at the banking giant.
The bank will combine its global commercial and institutional banking operations under the leadership of Michael Roberts and is creating a new international wealth management and premium banking division, which will be overseen by Barry O’Byrne. Additionally, HSBC appointed Pam Kaur as chief financial officer and announced plans to revamp its regional operations across the world.
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The changes mark HSBC’s biggest restructuring in at least a decade, reflecting pressure on Elhedery to reduce costs and protect the bank’s margins as central banks around the world begin to cut interest rates.
“The new structure will result in a simpler, more dynamic and agile organization as we focus on executing our strategic priorities, which remain unchanged,” Elhedery said in a statement.
Some of the details of the reorganization had already been reported by Bloomberg News on August 28 and September 9.
The changes will reduce the number of executives on the newly created key operating committee from 18 to 12 members.
With the appointment of Pam Kaur as chief financial officer, she becomes the first woman to hold the position of chief financial officer in its 159-year history. Kaur joined HSBC in 2013 as head of audit before moving into risk and compliance.
“She is highly respected and well known by the board, making her a unanimous choice,” Chairman Mark Tucker said in a statement.
As part of the new geographic structure, HSBC will have an eastern regional unit that will include Asia-Pacific and the Middle East, and a western market that encompasses its non-segregated banking in the UK, Europe and the Americas. Furthermore, Hong Kong and the United Kingdom will be independent units.
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Some key executives are leaving the bank as part of the restructuring. They include Stephen Moss, who headed the Middle East and North Africa, and Colin Bell, who headed European operations. Greg Guyett, current CEO of global banking and markets, has been named president of the newly created strategic client group.
With these changes, HSBC follows a model recently adopted by rival Citigroup.
Last year, Citigroup eliminated the positions of three regional heads who oversaw operations in about 160 countries around the world, along with several managers focused on geographic areas. These changes allowed the company to cut more than 20,000 jobs across the company.
HSBC will likely face restructuring charges as it implements these changes, according to Ed Firth, an analyst at Keefe Bruyette & Woods. He expects more details on these charges — which he estimates at between $100 million and billions — when the bank reports its annual results in February.
Elhedery’s appointment, effective last month, represents a rapid rise for the Lebanese-born, French-educated banker, who now faces the challenge of continuing to expand Europe’s largest bank.
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The merger of the commercial and institutional banking divisions, which includes investment banking, ends a long-running internal debate at HSBC over how to manage these two large and important operations. The proposal has faced resistance in the past, with former HSBC CEO Noel Quinn opposing the idea, according to previous information from Bloomberg.
The Eastern region, which will unite Asian and Middle Eastern businesses, will be led by David Liao and Surendra Rosha. Roberts will be responsible for the Western region.
“This reorganization to simplify the business and separate Hong Kong and the United Kingdom into their own units should be positive,” said Michael Makdad, senior equity analyst at Morningstar. “It could also help address the concerns of shareholders in Asia, who argued a few years ago that such a separation could improve returns.”
