HSBC Holdings PLC HSBC is in negotiations to sell its German fund administration business to private equity firm BlackFin Capital Partners. This was reported by Bloomberg, citing people with knowledge of the matter.
The discussions have advanced significantly and the deal could be finalized in the coming weeks for roughly €400 billion ($435.16 billion).
Rationale Behind HSBC’s Sale
Current CEO Georges Elhedery, who succeeded Noel Quinn last September, is leading a major business restructuring initiative. As part of the overhaul, HSBC merged its commercial banking division with its global banking and markets unit, which includes investment banking (IB), in January.
This initiative aims to mitigate costs by reducing the bank’s expensive layer of senior staff. The bank aims to achieve nearly $1.5 billion in annualized savings by the end of 2026. The company will likely incur nearly $1.8 billion in total severance and other upfront charges by the end of next year to implement business simplification efforts. Also, HSBC plans to redeploy $1.5 billion of additional costs to priority growth areas over the medium term.
In sync with this, last week, HSBC announced the sale of its private client trust business – HSBC Trust Company (UK) Limited – to Ludlow Trust. Also, last month, Reuters reported that HSBC is reducing half of its personnel (about 900) at its China digital wealth business, Pinnacle. Further, in January, the company announced plans to close its mergers and acquisitions (M&A) and some equities businesses in Europe, the UK and the Americas to enhance its focus on the Asian region. Additionally, HSBC closed its payments app, Zing, just a year after it launched the digital challenger.
In October 2024, the company announced an initiative to simplify its organizational structure and operate through four distinct lines of business — Hong Kong, UK, Corporate & Institutional Banking, and International Wealth & Premier Banking. The company announced the appointment of leadership teams across the segments in December 2024.
Similarly, other global banks have been focusing on streamlining their operations. Earlier this week, the Financial Times reported that Deutsche Bank DB plans to cut about 2,000 jobs in its retail banking division this year, with a reduction in the number of branches. This reflects a continuation of DB’s efforts to streamline operations and achieve financial targets by the end of the year.
Similarly, Reuters reported that Barclays PLC BCS intends to axe unrewarding customer relationships and further reduce the proportion of capital allocated to its investment bank as it accelerates its efforts to deploy capital toward higher-revenue generating businesses. This move is part of the three-year plan announced by BCS in February 2024 to save £2 billion from its cost base and redeploy its capital toward domestic businesses.
HSBC’s Zacks Rank & Price Performance
Over the past year, shares of HSBC have rallied 45.8%, outperforming the industry’s growth of 24%.
Image Source: Zacks Investment Research
Currently, HSBC carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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