HSBC to cut costs by US$3.5bn, deploy more capital in Latin America

Wednesday, May 11, 2011

The UK's HSBC (NYSE: HBC) will carry out a plan that includes US$2.5-3.5bn in cost savings and reinvesting in growth markets such as Latin America while scaling back elsewhere, group CEO Stuart Gulliver told a conference call for the bank's investor day.

Latin America represented 14% of the group's revenues but only 7% of deposits at US$88mn as of end-2010. The region posted a US$1.8bn profit before tax in 2010.

Gulliver said the bank will look for organic growth in its strategic markets of Brazil, Mexico and Argentina, reallocate capital from less strategic and underperforming businesses and capture wealth-creation opportunities in the region.

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Earlier this week, the bank reported a 29% increase in pretax profits from its Latin American units in 1Q11 compared with the same period in 2010, to US$542mn, thanks to stronger lending.

In the region, HSBC also operates in the Southern Cone and Central America.


HSBC's strategic execution plan aims at cutting its efficiency ratio to 48-52% by 2013 from 61% in the first quarter, and reaching a ROE of 12-15% over time.

Globally, the bank will focus on wealth management in 18 of the most relevant economies and limit retail banking to those markets where it can achieve profitable scale, Gulliver said.

"We face important challenges, and to capture this opportunity we must step up the pace and intensity of change. We will increase capital deployment discipline, directing investment to faster-growing markets and businesses."

The plan will also provide a buffer against regulatory and inflationary headwinds, he added.

HSBC operates through 7,500 offices in 87 countries and territories worldwide. It is one of the world's largest banks, with US$2.6tn in assets as of March 31.