LONDON – HSBC Chief Executive Stuart Gulliver will update investors on Wednesday on how he is doing in meeting his targets more than two years into a 3-year restructuring plan at Europe's biggest bank. <0005.HK> (for a graphic click on: http://link.reuters.
Gulliver has sold or closed 52 businesses, which have cut more than $80 billion in risk-weighted assets and brought in more than $10 billion. The deals include:
-Sale of 16 percent stake in Chinese insurer Ping An for $9.4 billion in December 2012, yielding a $2.6 billion profit.
-Sale of U.S. credit card unit in August 2011 for a $2.4 billion gain and the sale of 195 U.S. branches in July 2011.
-A series of sales in Latin America.
-A number of insurance businesses and minority stakes in businesses have been sold in Asia.
-The sale or closure of European businesses including Russian retail, Georgia and Slovakia, and some operations in Britain, Hungary, Malta, Greece, Monaco, Ireland and France.
TARGET-To cut $2.5-$3.5 billion from annual costs. To reduce costs as a percentage of income to 48-52 percent.
STATUS-HSBC said it found $400 million of savings in the first quarter to take annualized savings to $4 billion. Analysts expect him to raise his savings target to $4.5-$5 billion.
HSBC said its underlying cost/income ratio was 53.2 percent in Q1 and 66 percent last year.
Gulliver said he expected to cut 30,000 jobs as part of his restructuring, but add 15,000 jobs in faster growing areas to halve the net impact. That did not include businesses sold.
Gulliver has cut about 28,000 net jobs. HSBC had 260,000 staff at the end of March and that will fall to 254,000 when job cuts in Britain and disposals already announced are completed.
TARGET-Gulliver said he wants a common equity Tier 1 ratio of 9.5-10.5 percent under Basel III rules.
STATUS-HSBC reported a core Tier 1 ratio of 12.7 percent at the end of March. If Basel III capital rules were fully applied, the ratio would have been 9.7 percent.
Regulators have increased demands for strong capital since Gulliver set his goals so he is likely to target the top end of his range.
TARGET-Gulliver wants to deliver return on equity (RoE) of 12-15 percent. To get there, he expects return on risk-weighted assets (RoRWA) to be 1.8-2.6 percent.
STATUS-RoE was 14.9 percent in the first quarter and 8.4 percent last year. RoRWA was 3.1 percent in Q1 and 1.8 percent in 2012.
Analysts said he may struggle to hit an RoE of 12 percent this year and an increase in regulatory requirements since Gulliver set his goals means he may not do so in 2014 or 2015.
Gulliver said he aimed to grow revenues in fast growing markets, add $4 billion in additional revenues in the wealth business and add $1 billion in revenues from better connectivity between its investment bank and commercial bank.
Income in Hong Kong and the rest of Asia-Pacific last year grew by 16 percent and 27 percent from 2011, respectively.
The growth plans in wealth appear well behind plan. The bank said in May 2011 it had only added $300 million in incremental revenue. It said it had reached half its target for extra revenues from investment and commercial bank cooperation.
(Reporting by Steve Slater; Editing by Elaine Hardcastle)