HSBC will axe 30,000 jobs as it slashes costs and retreats from countries such as Russia, Poland and the U.S., where it is struggling to compete, Europe's biggest bank said after reporting a surprise rise in first-half profit.
HSBC's shares rose as much as 5 percent as first-half pretax profits of $11.5 billion were up 3 percent on a year ago, beating the $10.9 billion average in a Reuters poll.
The London-based bank said it had cut 5,000 jobs after restructuring operations in Latin America, the United States, Britain, France and the Middle East and that it would cut another 25,000 between now and the end of 2013.
That equates to 10 percent of HSBC's 296,000 workforce. The bank's 110,000 staff in Europe and North America will bear the brunt of the job cuts.
"It's a big number, but it makes sense because HSBC's costs are fairly high," Daniel Tabbush, analyst at CLSA in Bangkok, said of the staff cuts. "Hopefully these cuts help make an impact in helping lower the bank's cost-to-income ratio."
Britain's Unite trade union slammed the "brutal restructuring" despite strong profits for the bank.
New CEO Stuart Gulliver wants to slash annual costs by up to $3.5 billion, sell assets and retreat from countries where HSBC is sub-scale. The revamp, aimed at sharpening its focus on Asia, reverses a strategy that has been criticised for "planting flags" around the world.
But he said first-half results showed the recovery will be a slog, as tougher regulations bite hard on all banks.
"We're not celebrating here at all. This illustrates to us what a long journey this is and how tough it will be. That's unfortunately one of the reasons we have to make these job cuts," Gulliver told reporters on a call from Hong Kong
Costs rose 13 percent in the first-half from a year ago as staff numbers rose and wages increased in Asia, where banks are battling to hire and retain staff. Costs as a share of revenues were 57.5 percent. Gulliver wants to get them below 52 percent.
HSBC said many of the job cuts would come through natural attrition, as its turnover is 10-15 percent a year. It also expects to add 3,000 to 5,000 jobs a year in emerging markets, and it added jobs in Asia, Brazil and Mexico in the first half.
HSBC said on Sunday it would sell 195 U.S. branches to First Niagara Financial for about $1 billion in cash, and close another 13 of the 470 sites it had.
HSBC also intends to sell its U.S. credit card portfolio, which has more than $30 billion in assets, a move which would free up capital. Capital One Financial Corp and Wells Fargo are among the bidders, sources have said. Another suitor could be Barclays .
"We still have a number of people interested in that business. If we can't get the price we're looking for we have a number of options -- we can run it off, sell it in pieces, we could decide to keep the retail private label cards," Gulliver told reporters.
The geographical spread of HSBC's retail banking retreat will be less radical than outlined three months ago, however.
The bank now aims to shut or sell retail operations in a further 20 countries. In May, it had earmarked leaving 39 countries but has so far only closed in Russia and Poland.
HSBC is the first of Britain's big banks to report this week. Rivals are also cutting jobs and shaking up business models as the euro zone debt crisis has hit fixed income trading revenues hard and tougher regulations are hurting returns.
HSBC's return on equity improved to 12.3 percent in the first half, up from 9.5 percent in 2010 and within the 12-15 percent range Gulliver is targeting. But he said that first-half level would have equated to about 10.5 percent under new Basel III rules.
The bank warned increased regulation could hinder a global economic recovery that is already losing momentum, as governments grapple with sovereign debt crises and try to plug holes in their budgets.
Potentially radical changes for UK banks, due out next month which might force a ring-fencing of domestic retail banking, could cause more job cuts, HSBC warned. But it did not expect this to force HSBC to move its headquarters away from London.
By midday Londong time HSBC shares were up 4.5 percent.
HSBC's strong profits were driven by higher than expected revenues and a big improvement in bad debts, which fell 30 percent from a year ago to $5.3 billion, the lowest half-year level for five years.
That improvement drove a 131 percent rise in profits for retail banking and wealth management and aided a 31 percent profit rise at is commercial banking division.
Earnings at its investment bank arm, global banking and markets, fell 12 percent on the year. Like rivals, HSBC was hit by a drop in credit and rates income, especially in Europe.
"They're reasonably reassuring numbers but they're still pointing towards concerns about the global economy," said Colin McLean, managing director of SVM Asset Management, which owns HSBC stock.
Gulliver said revenues were growing strongly in the markets he is targeting, but showing muted growth in Europe and falling in the United States where its consumer finance arm is being run down.
"We're pretty confident China will manage a soft landing and we're confident the overheating that appears in pockets of the property market, especially here in Hong Kong, will be ably dealt with by the authorities," he said.