HSBC has announced an even bigger raft of job cuts -- aren't the banks meant to be doing okay now?
At the start of this week HSBC announced it was to cut approximately 35,000 jobs over the next 3 years, as part of a $4.5bn cost saving programme. That announcement sees HSBC not only join, but rise to the top, of a long list of global banks that have cut swathes of jobs in the last year.
Relative to the size of its workforce, only Deutsche Bank has cut more jobs when they announced that they would be shedding approximately 20% of their employees last year, amidst a major restructuring.
Aren't banks doing well these days?
Stock markets are at record highs, unemployment is at record lows and everything is going pretty okay -- right? While it's true that the global economy is in decent enough shape (coronavirus & global warming aside), for the last decade many banks have been operating in an era of record low interest rates.
Banks are heavily geared to interest rates. In very simple terms if they pay 1% interest on deposits, and charge 2% interest on loans, they make a 1 point spread. If interest rates rise, that spread usually rises with it - and hence the banks make more profit.
The first cut is (not) the deepest?
Usually, when having to give bad news it's better to rip the band-aid off and give it all at once. In the business world it's also known as "kitchen sinking". For HSBC... that's not what they did. Last October they announced 10,000 job cuts, only to announce another 25,000 this week. Bad news is bad enough, but when it comes in drips and drabs the market really doesn't like it, and it's why HSBC shares are down 6% since the news**.**
