HSBC shaken

Central to the repair job is a $100bn (£77bn) reduction in risk-weighted assets (RWAs) by the end of 2022 and the redeployment of capital from underperforming investment banking teams in Europe and the US to higher-growth regions, including Asia and Mexico. This, alongside cuts to US retail operations, sales and trading in Europe, and a merger of the group’s global private banking and retail divisions, will result in tens of thousands of job losses.

The financial implications are massive. Though it is expected to yield cumulative savings of $4.5bn, 90 per cent of the restructuring’s $6bn cost will fall in the next two years, which has resulted in the suspension of share buybacks until at least 2022.

Unfortunately, the backdrop for such a radical overhaul is ugly. While adjusted fourth-quarter figures were slightly better than expected, a downgrade to interest rate forecasts led to a $7.3bn goodwill impairment to reported numbers. Even more worrying, chief financial officer Ewen Stevenson warned of slowing revenues in Hong Kong and mainland China, RWA inflation, and up to $600m of loan impairments should the coronavirus outbreak endure into the second half of 2020.

Given this environment, and the complexity of restructuring – which apparently includes more than 200 separate cost-cutting initiatives – it is baffling that Noel Quinn is yet to be formally promoted to the role of chief executive. Chairman Mark Tucker defended the speed of the hiring process, though one wonders how quickly an external candidate could familiarise themselves with the job at hand, to say nothing of potential gardening leave.

Analysts at Shore Capital forecast adjusted net tangible assets of 719¢ at the December 2020 year-end.