HSBC Holdings will reorganise its worldwide operations into four business units and two geographic areas, as one of the world's largest banks creates a structure that makes Hong Kong - the H in HSBC - the "top strategic priority" in its global network of 62 markets.
Effective January 1, the bank's four business lines will be: Hong Kong, the UK, corporate and institutional banking, and wealth and premier banking. HSBC said it is pursuing the restructuring to achieve greater operational efficiency and growth, though it said the effort will lead to lay-offs.
For the Hong Kong business, the bank said HSBC and subsidiary Hang Seng Bank will "remain very separate in the way they compete" for business in the city. It said the Hong Kong unit of HSBC and Hang Seng will be governed by their local CEOs.
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The lender, which is the largest bank in Hong Kong and Europe, also said it was appointing Pam Kaur, currently the chief risk and compliance officer, as its first female chief financial officer.
The moves are the first major actions after Georges Elhedery took over as group CEO from Noel Quinn on September 2. HSBC said Kaur is filling the vacancy that was left after Elhedery was promoted.
"The changes that we are announcing today will make it easier for our colleagues to serve our customers and drive the future success of the group," Elhedery said. "The new structure will result in a simpler, more dynamic, and agile organisation as we focus on executing against our strategic priorities, which remain unchanged."
Before the restructuring, Xia Baolong, director of the Hong Kong and Macau Affairs Office, met HSBC's chairman Mark Tucker in Beijing on October 18. Xia said the bank should continue to contribute to China's development and support Hong Kong as an international financial centre.
The restructuring will lead to some lay-offs, Elhedery said in a media briefing.
"Inevitably, some senior roles will be made redundant because of the demise of duplicative roles or global layers of management," he said. "We have not quantified this at this stage."
Hang Seng Bank's headquarters in Central. Photo: Jonathan Wong alt=Hang Seng Bank's headquarters in Central. Photo: Jonathan Wong>
Elhedery said the bank is working to minimise the restructuring's impact on customer-facing staff members, in an effort to maintain a continuity of service.
"Importantly, we are not doing this for the cost element of it," he said. "We are doing this change to make sure we are more agile and faster in making decisions as a bank and to be more focused on the areas where we have strategic strength and growth opportunities."
As part of the restructuring, the 18-member group executive committee will be replaced by a 12-member group operating committee; the panel will include the leading decision makers at HSBC.
HSBC also said it would divide itself geographically into Eastern and Western markets. The Asia-Pacific and Middle East regions will be overseen by the two co-CEOs of HSBC Asia-Pacific: David Liao and Surendra Rosha. The Western markets portion will be led by US chairman Michael Roberts and will include the bank's non-ring-fenced UK business, as well as operations in Europe and Americas.
Elhedery said in the Western markets, HSBC has wholesale businesses but is limited in its retail activities. He said there would be "good synergy" in bringing the Western businesses together. For the Eastern markets, the main change is giving Liao and Rosha control of the Middle East.
"We will have Asia and the Middle East become one super region and the benefits are multiple," Elhedery said. "The Eastern markets have the biggest growth potential for the group, [and] Liao and Rosha will make sure we get the right focus for the growth. We have also seen an increasing engagement between Asia and the Middle East."
Elhedery said he looked forward to working with Kaur in her capacity as CFO.
"What I expect from Pam is great partnership, a good challenge and an excellent judgment of complex situations," he said.
Pam Kaur, HSBC's new chief financial officer. Photo: HSBC alt=Pam Kaur, HSBC's new chief financial officer. Photo: HSBC>
The lender's Hong Kong business will include Hang Seng and the HSBC Hong Kong business; this will be overseen by Liao and Rosha, who are members of the group operating committee.
"Hang Seng will definitely continue to maintain its own brand," Elhedery said. "HSBC and Hang Seng will remain very separate in the way they compete in the market with their own brand and their own customer proposition."
The Hong Kong unit of HSBC and Hang Seng will be governed by their local CEOs and they will not be subject to the global lines of business, Elhedery said, which will allow for more nimble decision making.
The new Hong Kong business will include personal banking and commercial banking, it said.
The UK business will be made up of personal banking - including First Direct and M&S Bank - as well as commercial banking, including Innovation Banking. This business will be overseen by UK CEO Ian Stuart.
A new corporate and institutional banking business will be created by integrating HSBC's commercial banking business outside Hong Kong and the UK with its wholesale banking operations in Western markets. This includes its UK non-ring-fenced bank, Europe, and the Americas. Roberts will lead corporate and institutional banking as well as the Western markets operation.
The international wealth and premier banking business will bring together HSBC's premier banking businesses outside Hong Kong and the UK, its global private banking and wealth management businesses, as well as asset management and insurance. Barry O'Byrne, the current wealth and personal banking business CEO, will lead the unit after restructuring.
"Theoretically, the HSBC restructuring may increase flexibility and enhance the decision-making process," said Kenny Wen, the head of investment strategy at KGI Asia.
"However, the restructuring will not have a short-term impact on daily operations or financial results of the bank. The changes are not expected to have a significant impact on the stock price. It will take time to show the impact of this restructuring on the group."
