HSBC's shock closure of M&A and ECM outside Asia: "It's crazy"
First, HSBC asked its senior bankers to reapply for their own jobs last November. Then HSBC said it was considering "thoughtful" job cuts. Then HSBC said it was cutting 40% of staff at senior levels. Then, it trimmed unexpected salespeople and traders. Now, it seems that it's closing swathes of its investment bank in the UK, Europe and the US and focusing on Asia and the Middle East.
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Bloomberg reported today that the bank sent a memo to staff this morning stating that: “We will retain more focused M&A and equity capital markets capabilities in Asia and the Middle East, and we will look to wind-down those activities in Europe, the UK and the Americas.” A spokesperson for the bank added that the changes are part of a "review" of the investment banking business and that the businesses are being wound down, "subject to local legal requirements.”
Speaking off the record, sources at the bank said the memo came as a complete surprise. "We've had a good year," said one banker in London, "This is crazy." Another observed that a "massive downsizing" seems to be coming to HSBC's sector teams. "Even senior managing directors only found out about this a few days ago," says one London-based VP. " - I only found out this morning." Junior bankers at HSBC say they too were blindsided.
Insiders say HSBC held a town hall early today to discuss the memo. One insider at the bank said the businesses aren't being wound down immediately, and that everyone is still working on their mandates and serving their clients. "It's all the same as before. This isn't an immediate thing."
In worst case scenarios, business closures are followed by the disabling of key fobs and people are unable to get through the doors. This famously occurred when UBS cut fixed income traders in 2012, for example, but such immediate cuts are harder to make when deals must be completed first.
HSBC declined to comment on how many people will disappear as part of the cuts to M&A and ECM in Europe and the US. The bank employs around 220,000 people globally and there are suggestions that the cuts could reach the tens of thousands. Headhunters said they've been receiving CVs from insiders at the bank for a while, but that many people there are hard to place elsewhere.
Market intelligence firm Tricumen said that HSBC bankers globally had some of the lowest operating revenues per head for full-time employees in the first nine months of 2024. Only Deutsche Bank was worse.
While HSBC's London, European and US bankers are at risk, its Asia Pacific based bankers will seemingly be fine. HSBC's North American global banking and markets business made a profit of only $3m in the three months to October 2024. Its non-ringfenced UK global banking and markets business made a profit of $442m. It's Hong Kong based business made a profit of $443m.
HSBC has no plans to close its equities trading business, but without an equity capital markets business in Europe and the US, it seems possible that HSBC's equities trading business in both regions will be closed too. "They're toast," observed one headhunter.
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