HSBC under new CEO begins biggest restructuring in a decade

Jason Alden/Bloomberg

HSBC Holdings unveiled a broad restructuring across different business lines and geographies as newly appointed Chief Executive Georges Elhedery embarks on an ambitious effort to cut costs at the banking behemoth.

The lender will combine its global commercial and institutional banking operations under Michael Roberts and is creating a new international wealth and premier banking business that will be overseen by Barry O'Byrne. HSBC also named Pam Kaur as chief financial officer and announced plans to revamp its regional operations around the world.

Taken together, the changes mean HSBC is embarking on its biggest restructuring in at least a decade. They're the latest sign that Elhedery has been under pressure to trim costs in order to protect the firm'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 against 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.

HSBC

The changes will reduce the number of executives who sit on the newly named key operating committee to 12 from 18.

With Kaur as chief financial officer, she is the first female finance director in its 159-year history. She joined in 2013 as audit head before overseeing risk and compliance.

"She is highly respected and well known to the board and was the unanimous choice," Chairman Mark Tucker said in a statement.

As part of the new geographic set up, HSBC will have an Eastern regional unit including Asia Pacific and the Middle East, and a Western market that includes its non-ring-fenced bank in the United Kingdom, Europe and the Americas. It also made Hong Kong and U.K. standalone units.

Some key executives are leaving as part of the restructuring. They include Stephen Moss, who runs Middle East and North Africa, along with Colin Bell, who led operations across Europe. Greg Guyett, the current CEO of global banking and markets, was named chair of the strategic clients group, a newly created role.

With some of the changes, HSBC is turning to a playbook recently used by rival Citigroup.

Last year, the New York-based company eliminated the roles held by three regional chiefs who oversaw operations in about 160 countries around the world along with legions of managers with that same geographic focus. Those changes are part of what's allowing the firm to cut more than 20,000 jobs across the company.

HSBC will likely incur restructuring charges as it implements some of the changes, according to Ed Firth, an analyst at Keefe Bruyette & Woods. He expects more details on those charges — which he estimated could be between $100 million to the "low billions" — when the firm presents its full-year results in February.

Elhedery's appointment, effective last month, marks a rapid ascent for the Lebanon-born, French-educated banker, whose challenge now is to show that he can further grow Europe's biggest bank.

Merging the commercial and institutional banking divisions, which houses its investment bank ends a long-running debate within HSBC about how best to manage two of its largest and most important businesses. The proposal has faced internal resistance in the past and former HSBC CEO Noel Quinn was opposed to the idea, Bloomberg previously reported.

The Eastern region will merge the Asia business with the Middle East and be headed by David Liao and Surendra Rosha. Roberts will oversee the Western region.

"This reorganization to simplify the business and separate Hong Kong and the U.K. into their own businesses should be positive," said Michael Makdad, senior equity analyst at Morningstar. "It may also help answer the concerns of shareholders in Asia, who argued a few years ago that such a separation could improve returns."