HSBC's 2% Profit Increase in 2024: CEO's Cost-Cutting Plan to Trim US$1.5 Billion by 2026

HSBC, Europe's largest bank, reported a 2% increase in profit for 2024, reaching $32.3 billion, as CEO Georges Elhedery unveils a cost-cutting plan to trim US$1.5 billion in costs by 2026. The bank's strong performance was driven by revenue growth in wealth and personal banking (WPB) and global banking and markets (GBM), as well as a net favorable impact from notable items.



Elhedery, who took the helm in September 2023, has been taking decisive steps to simplify the bank's operations and create a more agile, focused organization. As part of this strategy, HSBC has divided its operations into four businesses: Hong Kong, UK, corporate and institutional banking, and international wealth and premier banking. This move aims to reduce duplication of processes and decision-making, enabling the bank to better focus on its core strengths and markets, particularly in Asia.



To achieve the target of trimming US$1.5 billion in costs by 2026, Elhedery has proposed several cost-cutting measures:

1. Reducing personnel expenses by 8% over 2025 and 2026: Elhedery aims to cut personnel expenses by 8% over the next two years, generating around US$300 million of cost reductions in 2025. To achieve this, the bank plans to incur severance and other up-front costs of US$1.8 billion over 2025 and 2026.
2. Simplifying the bank's structure: Elhedery's restructuring plan aims to reduce duplication of processes and decision-making, enabling the bank to better focus on its core strengths and markets.
3. Dynamic management of costs and capital: Elhedery has put in place a smaller, core team of leaders with a growth-oriented mindset and a focus on dynamically managing costs and capital. This strategy is likely to be effective in identifying and implementing cost-saving measures.

HSBC's cost-cutting plan aligns with its strategic focus on Asia, as the bank aims to invest more resources and attention to its core markets, such as Hong Kong and mainland China. However, the plan may also have implications for the bank's operations in other regions and its employees. The targeted cost reductions may result in job losses, which could impact employee morale and retention. Additionally, the bank may need to reallocate resources or adjust its strategies in Europe and the United States to maintain its competitive position.

In conclusion, HSBC's 2% profit increase in 2024 demonstrates the bank's ability to navigate various market conditions and maintain a strong financial position. CEO Georges Elhedery's cost-cutting plan, targeting US$1.5 billion in cost reductions by 2026, is likely to be effective in improving the bank's efficiency and enabling it to better compete in the global market, with a particular emphasis on its core markets in Asia. However, the plan may also have implications for the bank's operations in other regions and its employees.