HSBC “slaughtering the staff”? As suggested yesterday, global bank HSBC wants to become less global by slashing tens of thousands of jobs, cutting businesses and spending on premises, software and computers, and quitting two emerging markets — Turkey and Brazil (although a representative office will remain in the latter). All up the bank wants to chop a massive US$290 billion in assets from its swollen asset base of US$2.6 trillion. Staff losses will reach 50,000 over the next two years as total employment falls to around 208,000 from 258,000 at the end of last year. Some 25,000 jobs will be lost from the bank, especially its investment banking business, which will be slashed, and another 25,000 from its technology areas, which will be moved to the Cloud and to India holus-bolus, judging by last night’s commentary from senior executives.
The bank is looking for cost savings a year of US$4.5 billion to US$5 billion. One analyst described it as “slaughtering the staff”, which he said won’t work in a bank as huge and unwieldy as HSBC. He said the bank has to be simplified. HSBC, by the way, says it hasn’t made up its mind about relocating its HQ from London to Asia, but one will come by the end of this year. The tenor of HSBC’s restructuring is to concentrate more on Asia and less on other regions, especially emerging markets, Europe and the UK where its local banking business will be separated and ring-fenced in capital and operational terms. That will cut the amount of tax the bank has to pay the Cameron government, and allow for a move back to Asia. But the change in one key measure tells us why this is happening — and how lucky the big four Australian banks are.
HSBC said it was now targeting a return on equity greater than 10% by 2017, down from its previous target of 12-15% by 2016. That is a sharp downgrade and tells us that HSBC doesn’t see any surge in bank lending and profits in the next three years. And our big four banks, well, they all earn 14%-15% and more on equity. Fat, juicy and protected. Don’t let them claim otherwise. — Glenn Dyer
Takeaway too dear. Despite claims from tech heads and other boosters that the $855 million purchase price of Australian takeaway delivery group Menulog by UK group Just Eat could be justified by modern hi-tech, pie-in-the-sky accounting measures, investors in the UK have shown a far more hardheaded approach to the deal — it was too high and the shares are not worth it. In fact, in a stunning rejection of the deal by its own shareholders, Just Eat’s aim of raising most of the 445-million-pound purchase price from a rights issue to shareholders has been handed a stunning rejection. Only 41.32% of the issue was taken up (or just over 185 million pounds), leaving a 62 million share shortfall (worth around $262 million pounds). That was a pretty big thumbs down from the company’s small shareholders. The lack of support from small shareholders is an embarrassment and means Just Eat’s expansion will become problematic if it has to depend on its major shareholders such as Index Venture funds, SM Trust and Vitruvian Partners. — Glenn Dyer
All in the family. That’s not the vintage US TV sitcom, but the world’s biggest family company — Walmart Stores — which is controlled by the Walton family (not the saccharine TV series), which owns about half of the world’s biggest retailer. It announced a new chairman last Friday as the 23-year veteran incumbent Rob Walton handed over duties to his son in law, Greg Penner (thanks, “Dad”), who has been a director since 2008 and was named vice chairman a year ago this month. Now, when you control close to 50% of any company you can just about do what you want. But investors were not impressed, sending the shares down 1.5% on the day to a 16-month low, and a loss of market value on the day of US$1.77 billion. The shares lost more than US$1.2 billion in value on Monday and Tuesday with another series of falls. That took the loss so far in 2015 to a very nasty US$22 billion.
Even a wealthy family like the Waltons can feel that pain. Remember the family revealed a month or so ago that they would place around 6% of the company’s shares in a trust, which would be sold off gradually to raise around US$15 billion to charity over the years. The family took that decision because share buybacks had boosted their combined holdings to just on 50%, which was too high for comfort. The loss of value this year so far has come despite the share buyback scheme, the improving US economy and signs of improved sales growth, especially under new US boss, Greg Foran (the former Woolworths’ senior executive in Australia). But an independent chairman, as more and more investors want? That’s a step too far for the Waltons. — Glenn Dyer
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