New HSBC chief unveils $3.5bn drive to cut costs

HSBC'S new chief executive is to jettison swathes of the banking major's retail and wealth management businesses in a bid to cut as much as $3.5 billion (£2.1bn) in costs and boost profits.

Stuart Gulliver, formerly head of HSBC's investment bank, also said yesterday the group may sell its US credit card arm to help reverse a rising cost/income ratio.

But in his strategy presentation to the City, Gulliver indicated the bank remained committed to its UK retail banking arm, where it has strong scale, and Hong Kong.

Europe's biggest bank said the retreat from high street banking in some unidentified countries and other savings would help reduce the cost/income ratio to 48-52 per cent by 2013 from 61 per cent in the first quarter of 2011. Yesterday's blueprint followed a 14 per cent fall in Q1 profits unveiled on Monday.

"We clearly have a cost problem," Gulliver told the meeting of more than 100 analysts and fund managers at the group's Canary Wharf HQ. Hinting at communication problems at the bank, the new boss also said: "We're a very large firm that delivers significant profits, but we're complex and, historically, we've struggled to tell a coherent story about why our shareholders should own us."

HSBC said it would concentrate its wealth management business on 18 of the most relevant economies, and limit retail banking to markets where it felt it could achieve scale. HSBC has 95 million customers in 87 markets.

Gulliver said in retail banking it would focus on core markets such as Britain and Hong Kong, high growth markets like Mexico, Brazil and Singapore, and small countries where it already has a strong position. HSBC has expanded in Scotland in recent times, where it employs about 3,000, including 1,000 at a call centre in Hamilton and a further 500 at a site in Edinburgh Park.

In 2010, the group's Scottish operations increased lending to small businesses (SMEs) by just under 16 per cent, with mortgage lending north of the Border up 23 per cent on the previous year. HSBC has already said it is to exit retail banking in Russia and review its US retail arm, where it has 475 branches.

Gulliver also said he believed the bank could get $4bn annually in additional revenues from winning business from wealthy customers in fast growing markets. It defines the so-called mass affluent as people with liquid assets of $100,000 or more.

He said he believed the bank could get an extra $1bn from making commercial and investment banking work more closely together. "We will increase capital deployment discipline, directing investment to faster growing markets and businesses as we scale back elsewhere," Gulliver told analysts.