HSBC’s Strategic Overhaul Under CEO Georges Elhedery
HSBC is carrying out one of the bank’s largest restructurings in decades under new CEO Georges Elhedery (who became CEO in Sept. 2024). The plan shifts resources away from low-return Western markets and refocuses on Asia and the Middle East. Key actions include winding down most M&A advisory and equity-capital-markets (ECM) businesses in the US, UK and Europe, while keeping financing-led activities (such as debt and leveraged finance) where HSBC is strong. At the same time, overlapping divisions are being consolidated (for example, HSBC has merged its commercial banking and investment banking units and simplified regional structures). The bank says these changes create a “simpler, more dynamic” organization that can “better focus on the businesses where we have clear competitive advantage”. Executives estimate the restructuring will incur roughly $1.8 billion in charges (mostly severance and transition costs) over 2025–26, but will drive about $1.5–$2.0 billion in annual cost savings once fully implemented.
| Initiative | Scope / Details | Projected Outcome |
|---|---|---|
| Exit Western M&A/ECM | Wind down mergers-and-acquisitions and equity-cap markets teams in US, UK and Europe | Cut low-return operations; redeploy talent and capital to core markets (Asia/ME) |
| Consolidate business divisions | Merge commercial banking with global banking; streamline reporting lines | Simplified structure, faster decisions, and cost savings; sharper focus on competitive units |
| Retention contracts for bankers | Place select bankers on 3–6 month contracts during wind-down | Ensure orderly exit from closing units; maintain client relationships during transition |
| Workforce and cost cuts | Trim senior management and research ranks (e.g. >2 dozen analysts); target ~$1.5B in annual savings | Lower operating costs (~8% of staff expense); charges ~$1.8B upfront; improve return on equity |
| Shift to Asia/Middle East focus | Double IB investment in Asia and Middle East; exit non-core businesses (e.g. US small-business banking) | Leverage high-growth markets and trade corridors; align resources with HSBC’s profit centers |
Short-Term Retention and Tactical Exits
HSBC is taking a surgical approach to exiting businesses. In areas that are being wound down, the bank is moving key bankers onto short-term retention contracts. According to people familiar with the plans, selected IB dealmakers and syndicate bankers have been put on 3–6 month contracts so they can finish out existing client mandates before a business is shuttered. These retention agreements cover teams in Europe, Asia and the Americas, and are intended to ensure an orderly transition for clients and deals during the pull-back. At the same time, HSBC has formally informed staff that major IB units will close: for example, in January 2025 it told its corporate advisory and equity underwriting teams in New York, London and continental Europe to prepare for shutdowns, affecting hundreds of jobs. The exits are “tactical” rather than a total pullback – HSBC will keep its debt capital markets, leveraged finance and infrastructure finance operations globally, focusing on where it has a competitive edge.
Consolidation, Simplification and Focus
The overarching rationale is consolidation and simplification. Elhedery has re-engineered HSBC’s structure to eliminate duplication and accelerate decisions. For example, the Commercial Banking division has been merged into Global Banking & Markets, and HSBC has made its businesses in key regions (like the UK and Hong Kong) more standalone to improve accountability. Management repeatedly emphasizes “focusing on products and geographies where we have clear competitive advantage”. The West’s large M&A and ECM businesses historically generated only a small fraction of HSBC’s total fees – roughly 6% of group income last year – so the bank judged it better to redeploy those resources. In practice this means HSBC will shutter its advisory and IPO teams in Europe and the US, while keeping niche financing desks. The bank’s chief executive of Asia & Middle East (Michael Roberts) summed it up as moving “to a more competitive, scalable, financing-led model”.
These changes are aimed at cost-efficiency and clarity. HSBC’s CEO notes that many businesses were “not central” to the bank’s strategy, so cutting them will fund growth elsewhere. The bank has set a high bar for simplification: one internal presentation (leaked to the press) said the overhaul targets the equivalent of 8% of total staff costs in savings through efficiency measures. Those measures include combining reporting lines, cutting management layers and deploying more technology. In short, HSBC plans to “simplify and streamline” so that decision-making is faster and resources flow to high-return activities.
Financial Implications
The cost impact of the restructuring is significant. HSBC expects to incur about $1.8 billion in one-time charges over 2025–26 for severance, termination fees and other exit costs. These estimates are roughly in line with previous guidance from management and analysts. On the other hand, management projects that the cuts will generate around $1.5 billion of annual savings by end-2026, roughly offsetting the up-front costs after a two-year payback. (A Bloomberg interview with Elhedery noted the bank is “saving $1.5 billion in efficiency costs” to free up capital for higher-return businesses.)
In addition to cost cuts, HSBC plans to reallocate capital: it will take $1.5 billion out of non-strategic activities and move it into growth units. This reallocation, plus higher efficiency, is intended to boost the bank’s return on equity. HSBC has kept its mid-term targets unchanged, aiming for a “mid-teens” return on tangible equity through 2025–27. The bank also unveiled a fresh $3 billion share buyback in April 2025 alongside its first-quarter results, signaling confidence in the strategy. Still, analysts caution that the benefits depend on HSBC’s ability to grow revenues in core markets. The trade environment and economic outlook pose risks: in the earnings call, Elhedery warned that global trade tensions could shave up to $500 million off HSBC’s revenues in an adverse scenario.
Global Investment Banking & Workforce Impact
HSBC’s overhaul will shrink its global investment banking footprint. Newer announcements confirm that hundreds of IB roles are being cut or redeployed. In research and markets, HSBC has already trimmed staff: for example, in May 2025 the bank dismissed more than two dozen research analysts, combining teams and culling overlap. Within senior ranks, HSBC is reducing management headcount sharply – insiders say about 40% of the top 175 executives are slated to be cut by mid-2025. Some high-profile departures have occurred or are expected: Ed Sankey (head of EMEA ECM) and Greg Guyett (former global banking head) are leaving, among others.
Overall, HSBC still employs about 220,000 people worldwide, but the regional mix is shifting. The Americas and Europe will host much smaller IB teams going forward. In practical terms, HSBC will retain equity analysts and ECM teams only for multinational clients with Asian/Middle East operations. According to Reuters, affected bankers find the cuts “unsettling,” and morale in related divisions has taken a hit. HSBC executives contend that the process has been “measured, thoughtful and fair,” but acknowledge there are “human costs” to making such swift changes. In sum, the workforce is leaner and more tightly aligned with HSBC’s strategic priorities, but that has come via substantial layoffs and exits across Western offices.
Market Context and Industry Trends
HSBC’s reset reflects a broader trend in global banking. Many large banks have moved to focus on core markets and shed costly trading or advisory businesses. For example, Germany’s Deutsche Bank has largely exited equities trading, and UBS has scaled back certain trading lines after its merger with Credit Suisse. In the UK, Barclays and NatWest have emphasized efficiency and digital banking as margins are squeezed. HSBC is one of the latest to pivot: its leaders note that despite heavy investment, “almost no foreign banks have achieved meaningful market share in US equity investment banking”. By contrast, Asian markets (and parts of the Middle East) offer faster growth and trade flows.
Investors seem to understand the logic: several large shareholders publicly backed the plan to cut U.S./Europe deal teams, calling it sensible given HSBC’s franchise strength in Asia. The timing coincides with a cyclical slowdown in capital markets activity in the West. Ironically, just as U.S. regulators have promised to loosen rules to spur IPOs and dealmaking, HSBC is reducing its advisory presence, betting that the long-term payoff from Asia outweighs any short-term western boom. The move also aligns with government and geopolitical trends: HSBC remains one of the world’s biggest trade financiers, so concentrating on the Middle East and Asia may hedge against global trade tensions.
However, the industry-wide cost-cutting wave raises challenges. With banks everywhere tightening their belts, retaining top talent is harder. HSBC’s extensive cuts will test whether it can still provide comprehensive coverage in Asia while scaling back elsewhere. Competitors are watching closely: a successful turnaround could prompt peers to accelerate their own restructurings. The changes have also sent a political signal – in early 2025 HSBC’s CEO co-signed an industry letter urging UK banking reforms to support growth, underscoring how these strategic shifts affect broader policy discussions.
Strategic Outlook and Long-Term Goals
Georges Elhedery’s long-term vision is a leaner, Asia-focused HSBC. The bank is reorganizing into four main global businesses and has already set new leadership teams for each. Going forward, HSBC aims to grow in areas like Asia-Pacific wealth management, transaction banking, and corporate finance – sectors where it sees sustainable “quality” revenue growth. Hong Kong remains central to this plan; Elhedery has highlighted its role as a leading cross-border wealth hub and a gateway to China’s markets.
Financial targets remain ambitious: HSBC is reiterating a goal of mid-teens return on equity and continued dividend payments. It expects to fully realize efficiency gains by around 2027, at which point the one-time costs will be behind it. Culturally, the bank emphasizes digital innovation and customer-centricity even as it cuts staff. As Elhedery put it in a press release, the aim is to “deliver best-in-class products and service excellence” in fewer core areas.
In summary, HSBC’s restructuring under Elhedery is a bold repositioning: it trades a global, full-service model for a leaner, corridor-based one anchored in Asia and the Middle East. The payoff will depend on execution. If the bank successfully reallocates capital and retains enough high-performing bankers in its chosen growth markets, it could emerge more profitable and focused. But the downsizing also entails execution risk: overly aggressive cuts could undermine client relationships or leave coverage gaps. Investors and analysts will be watching HSBC’s next earnings closely to see if the promised cost savings and refocused strategy translate into stronger results.
