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Six charts explaining why HSBC shouldn’t slash its investment bank

HSBC layoffs

If you work for HSBC’s global banking and markets (GB&M) division and are feeling sweaty about rumours of 20,000 redundancies across the bank in the imminent future, Chirantan Barua, senior analyst at Bernstein Research, is here to assuage your angst.

In a new note, Barua says HSBC has little to gain from slashing its investment bank in the style of UBS. The unit is structured very differently to that of peers, with massive balance sheet management (BSM) and transaction banking (‘banking’) operations alongside an overwhelmingly FX-focused markets business. Moreover, this markets business is performing well compared to peers and is integral for the functioning of the broader HSBC group.

Taken from Barua’s presentation, the charts below make GB&M’s case. HSBC’s traders can only hope that Stuart Gulliver looks at them before his investor day presentation next week.

Chart 1: Admittedly, Global Banking and Markets’ (GB&M’s) return on assets has declined…

 

HSBC 1

Chart 2: But it would be wrong to blame this decline on the markets business – GB&M is more about managing liquidity for HSBC as a whole

HSBC 2

Chart 3: HSBC’s sales and trading business is mostly skewed towards FX trading on the back of the bank’s own trade flows anyhow. You can’t just cut this with hurting the rest of the bank

HSBC 3

 

Chart 4: HSBC salespeople and traders also perform pretty well compared to their competitors 

HSBC 4

Chart 6: And revenues from HSBC’s sales and trading (global markets activities) are expected to increase substantially in the coming years anyway 

HSBC 7


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