HSBC considers cost-cutting merger of commercial and investment banking units

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HSBC’s top executives have discussed a plan to merge its commercial and investment banking units, bringing together two of its three divisions in what would be a significant move by new chief executive Georges Elhedery to cut costs. 

Under the proposal, the bank would combine its commercial banking business, which accounted for 35 per cent of its revenue last year, with its global banking and markets unit, which works for larger clients and made up 24 per cent of revenue according to the bank’s most recent annual report. 

A merger between the two units would help Elhedery with his plans to slim down the bank and cut out some of its management layers, said one person familiar with the plans.

Elhedery also plans to focus on increasing earnings from fee-based businesses such as asset and wealth management to counteract declining net interest income.

While discussions have taken place, there is no certainty that the plan will be implemented, two people with knowledge of the matter said.

A merger of the two units would come after HSBC said last month that Barry O’Byrne, the global head of its commercial banking business, would move to run its wealth and personal banking unit. He will replace Nuno Matos, who is leaving and had been a leading contender for the chief executive job that Elhedery won this year. 

The bank did not name O’Byrne’s successor at the commercial bank last month, saying it would be announced “in due course”. Jo Miyake will run the commercial bank on an interim basis. The bank declined to comment. Bloomberg News first reported the discussions. 

Cutting costs is a top priority for Elhedery, who took the helm of the bank this month. The bank’s employee numbers have remained high despite a pledge by former chief executive Noel Quinn that he would get it down to 200,000 full time jobs by the end of last year. 

HSBC reported expenses of $8.1bn in the second quarter, up 3 per cent from a year earlier, which it said was partly due to higher technology costs and inflation.  

The commercial banking and global banking and markets businesses both include trade finance, payments solutions and credit and lending, though the latter unit serves larger customers. 

Quinn, who departed as chief executive this year, had spent much of his career in HSBC’s commercial banking business.