HSBC to slash post-Covid office space by 40% as profits drop by a third

HSBC is to reduce its office space around the world by nearly 40% as part of sweeping cost cutting designed to capitalise on new part-office-part-homeworking arrangements after the pandemic.

The decision to move to new hybrid working arrangements was announced as HSBC confirmed it was accelerating its pivot towards Asia, including China and Hong Kong, despite concerns about the political crackdown in the former British colony.

Executives said on Tuesday that the success of remote working meant the bank could cut down on business travel and reduce its office footprint by nearly 40% over the next few years.

The bank’s chief executive, Noel Quinn, said he was committed to keeping the bank’s London’s Canary Wharf head office, but that HSBC would probably shed offices elsewhere in the capital, as they came up for lease renewal.

Staff will then be squeezed into less space though they will also work from home. “The nature of working within our offices will change to have a higher occupancy per square foot, because we’ll have a hybrid style of working,” Quinn said.

HSBC has 66 offices in the UK, at least 10 of which are in London, according to its annual report.

The exercise will be made easier by widespread job cuts that reduced its headcount by 11,000 last year. Around 17% of senior managers were made redundant. Chief operating officer John Hinshaw told analysts that there were also opportunities to cut back-office roles, including a third of the bank’s 7,000-strong finance division.

HSBC is expected to cut up to 35,000 jobs as part of its cost-cutting plans.

HSBC said it was also cutting the bonus pool for its bankers by 20% to $2.7bn (£1.9bn) after the lender recorded a 34% drop in profit for 2020 to $8.8bn (£7.6bn). The bank put aside $8.8bn to cover a potential jump in loan defaults linked to the pandemic.

But HSBC still managed to hand out bumper pay packets to many senior bankers. According to its annual report, 324 bankers were paid more than €1m (£863,000) last year, while eight were paid over €5m.

One unnamed HSBC banker was handed between €9m-10m, roughly double the £4.2m paid to the chief executive for 2020.

Quinn waived his cash bonus in light of the pandemic, but still earned a share bonus worth £799,000. The chief executive donated a quarter of his £1.3m base salary, leaving him with about £3.8m in total pay.

The London-headquartered lender announced it would resume dividend payments despite the drop in profits, with plans to pay shareholders a combined $3.1bn at 15 cents per share. It came after the Bank of England ended a temporary ban that forced HSBC to scrap a $4.2bn payment to shareholders last spring. That ban was lifted – with limits – in December.

HSBC’s London-listed shares fell 1.3% to 426p on Tuesday afternoon.The lender also confirmed it was doubling down on its operations in Asia, where it makes the vast majority of its profits. HSBC’s Asian business reported $12.8bn in profits in 2020, easily offsetting the $4.2bn loss logged in Europe.

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The bank is planning to invest a further $6bn in Asia over the next five years, including in Hong Kong and China. It is pressing ahead despite facing criticism in the west for ignoring threats to local democracy, supporting China’s controversial security law, and freezing the accounts of protesters who critics claim are the real target of Beijing’s crackdown.

Quinn confirmed he was considering shifting more of his top executives to Hong Kong. “I think it is important for some of the executive team to be closer to the growth opportunities, particularly those in frontline roles serving the global businesses,” he said.

However, he stressed that HSBC was not abandoning the west, and was still committed to its London headquarters. “The vast majority of my senior executive roles will remain based here in London, including myself,” Quinn added.

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