HSBC’s Big Announcement Fails To Impress; Big Challenges Ahead, 3 Way Spinoff Coming Says The Edge
Jun 9, 2015
“No one on the HSBC board has restructuring experience: The Edge”
By Michael Ide, Senior Writer, ValueWalk: HSBC Holdings plc (ADR) (NYSE:HSBC) (LON:HSBA) is down 1% today to 613p after CEO Stuart Gulliver announced major changes including shedding up to 50,000 jobs, shutting down operations in multiple countries, and reducing risk-weighted assets by 25%. While the changes were welcome, analysts mostly expected them and in some cases had expected HSBC to go further. If HSBC doesn’t move to Hong Kong as many hope, or if Gulliver stumbles on execution, shares could sink even further down the road.
This announcement comes shortly after JPMorgan’s decision to trim 2% of its workforce, 5000 jobs, and the surprise resignations of Deutsche Bank AG (NYSE:DB) (ETR:DBK) (FRA:DB)’s dual CEOs Anshu Jain and Jürgen Fitschen in what is proving to be a difficult time for big banks. The Edge Consulting Group COO, Ryan Mendy, who has been predicting the breakup of big banks in the next few years, says that he’s more certain of his thesis now than he was before.
“I don’t see this affecting anything to be honest, if anything what should be really understood here is that complexity is the enemy of execution,” says Mendy. “There’s no one on the board who has any experience doing restructuring.”
Even if the intention behind today’s announcement is meant to address the severe headwinds that Mendy has identified, he doesn’t believe that the impact will be large enough to actually address them. Continued lawsuits, weak earnings, and other corporate governance issues play into his theme of a sector that has been shielded from serious restructuring.
He says that the activist investors he talks to at The Edge are keen to unlock shareholder value by breaking up large banks, although it’s difficult to push a large, heavily regulated business to make such significant changes.