HSBC fired many senior bankers in Q1 2025. One year later, costs are up 3%

HSBC, how's it going? Well. It's up, and its down.

We are now one year on from HSBC's surprise decision in the first quarter of 2025, to close its M&A and equity capital markets businesses outside of Asia and the Middle East. Senior bankers were let go as a result, with many departing after February 2025 when bonuses were due to be paid. 

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The disappearance of large chunks of HSBC's corporate and investment bank might have been expected to reduce costs in the unit. However, today's first quarter results suggest this is not so: operating costs at HSBC's corporate and institutional bank (CIB) were up 7% year-on-year in Q1 2026, or 3% on a constant currency business. 

How so? Despite lopping off large areas of its business, HSBC said operating costs rose across its CIB because of both inflation and the way it's been accruing performance-related pay (ie. bonuses).  HSBC said today that first quarter costs in the CIB were 'mitigated' by last year's "simplification", implying that these accruals may be up by even more. 

This seems like fine news for everyone who survived HSBC's 2025 purge. However, it's also worth bearing in mind that HSBC's investment bank and sales and trading businesses are diminutive within the corporate and institutional bank. The transaction banking business, which generated $2.7bn of revenues in the first quarter (versus $260m for the investment banking business and $750m for sales and trading) is where it's really at. To the extent that people at HSBC's CIB get paid up this year, transaction bankers may be first in line.

HSBC's salespeople and traders appear to have fared worse than its investment bankers. As the chart below shows, debt and equities trading revenues were down 23% year-on-year, even as rival banks' sales and trading revenues rose by double digits. FX revenues, which are included in transaction banking, were up 14%.

More "simplifications" are yet to come. HSBC's CFO Pam Kaur said today that cost savings will be more apparent in the second half of 2026. $1.4bn of annualised costs have been cut across the bank since 2024, and $1.5bn of costs will have been cut on an annualised basis come June 2026. Kaur said these cuts already fed through to $300m of lower costs across the bank as a whole in the first quarter, when HSBC unfortunately also spent $100m on further restructuring. Amidst these changes, HSBC has also arrived at a new intention of achieving $400m of additional cost reductions by 2028. 

At the very least, it's a reminder that cutting costs in a bank isn't a straightforward thing. Nor are cost reductions always visible in the bottom line. HSBC intends to reinvest $1.8bn of its eventual cost savings in opportunities where it has "a clear competitive advantage and accretive returns." It also plans to invest heavily in AI and to maybe cut another 20,000 potential jobs in the process. Technology spending was one reason given today for rising costs across the bank in the past quarter.

For the moment at least, HSBC's endeavours are not feeding through to profits in its CIB. Profits across the corporate and institutional bank were down 9% year-on-year in Q1, even as revenues were up 5.6%. $700m set aside for credit losses didn't help, with $400m relating to failed mortgage lender MFS and the rest to geopolitical risk. HSBC's investment banking pivot to the Middle East may take longer to bear fruit in the new environment. Very good luck indeed.

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