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Playing with fire—HSBC fires you and hires your neighbour
Though HSBC’s strategy of trimming the fat, or should we say relocating the fat, will be a welcome move for shareholders, how will it impact the economy?
August 4, 2011 3:15 by Eva Fernandes
HSBC has been the subject of much debate here on Kippreport; though in the past our conversations tend to focus on the customer service of the glo-cal bank, this week is the exception. Of course we are talking about the announcement everyone is talking about: the decision to both layoff and hire an incredible number of staff.
HSBC who reported a $11.5 billion pre-tax profit for the first half of 2011, which was up from $11.1 billion a year ago, said that as part of its efforts of slimming down operations, it will lay off over 30,000 jobs before 2013. Prior to this announcement HSBC had laid off over 5,000 employees during the past six months.
MEET THE LOSERS AND WINNERS
And though the rather optimistic pre-tax profit comes as a welcome change for shareholders, there is no denying that not all of HSBC’s global operations performed equally. For one thing, profit from Europe made up only 19 percent of the total, a considerable drop from the 32 percent it enjoyed during the same period last year. In the US, HSBC announced that it will be getting rid of more than 40 percent of its branch locations (the bulk of which are in upstate New York).
On the other hand, HSBC performed well in emerging markets: the bank got 76 percent of its profit from Latin America, Asia and the Middle East, up from 64 percent during the same period last year, according to its Monday earnings statement. Compare that chunky figure to the measly 5 percent the North American business contributed to HSBC half year profit.
And as HSBC noted in its earnings report “Growth in the U.S. and Europe is likely to remain sluggish as long as the impact of high debt levels and government budget cuts weigh on economic activity.” In order to combat that, chief executive Stuart Gulliver said that the bank is planning on…
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