Banks

Hsbc, restructuring begins: separation of East and West, 4 divisions created

Pam Kaur becomes chief financial officer: she is the first woman to hold the position in the bank's 159-year history

by Nicol Degli Innocenti

22 October 2024

3' min read

Key points

Management
The ceo's turn
Wealth management and cost cutting

3' min read

Internal revolution at Hsbc: Europe's largest bank announced today a double restructuring of its business. The new CEO, Georges Elhedery, decided to go ahead with the separation into two between East and West and the division into four of the business between UK, Hong Kong, corporate and institutional banking and asset management.

The East will include the Asia-Pacific region and the Middle East and the West will include Europe, the United Kingdom and South and North America. The changes will take effect on 1 January.

The restructuring 'will lead to a simpler, more dynamic and more agile organisation,' Elhedery said. 'With these changes we can focus our attention on increasing market share in those businesses where we have a competitive advantage and the greatest opportunities for growth.

Management

Hsbc's management structure also changed, with the promotion of chief risk & compliance officer Pam Kaur to chief financial officer, the first woman to hold the role in the bank's 159-year history. Elhedery held the role of Cfo until her appointment as CEO this year to replace Noel Quinn, who surprisingly announced his resignation.

The executive committee is also streamlined from 18 to 12 members and changes its name to Group operating committee. Head of Europe Colin Bell and Head of Middle East Stephen Moss will leave the bank. The new structure will allow Hsbc to "realise its full potential and succeed in the future," Elhedery said.

The Ceo's Turning Point

Elhedery, at the helm for less than two months, has turbocharged a restructuring that has been going on for some time. In recent years, the bank has scaled down its activities in Western markets to focus more on Asian growth markets and increase the number of corporate clients, which are already over 1.2 million. Rising geopolitical tensions between the West and China weighed on the decision of the new CEO, who has worked in Asia and speaks Chinese.

The Chinese insurance company Ping An, one of the largest shareholders of Hsbc, has long been pushing for a separation of Asia from the rest of the bank's operations. Last year, however, the shareholders rejected the proposal.

Elhedery was a close associate of his predecessor Quinn, who in his five years as CEO sold assets considered to be non-strategic, eliminated non-performing businesses and cut 35,000 jobs, boosting the group's profits and boosting the share price. Hsbc is listed in both London and Hong Kong.

Wealth management and cost cutting

Now the new CEO finishes the work started by Quinn. The creation of a separate wealth management division, to be headed by Barry O'Byrne, demonstrates the bank's determination to strengthen wealth management and increase the number of clients globally.

The announced merger between the institutional and corporate divisions should lead to greater cooperation and cost savings, according to analysts, putting an end to what had become an internal competition in customer research and product sales.

"Aligning functions for a group with almost 214,000 employees has exceptional costs," commented Jason Napier, an analyst at Ubs, adding that the costs of restructuring "are significant but for now unknown".

On 29 October Hsbc will announce its quarterly results and it is expected that Elhedery will give more details on restructuring, planned savings and possible lay-offs at that time. Hsbc has 214,000 employees globally.