HSBC cuts employees due to excess staff, insufficient work

HSBC recently announced significant cuts to its M&A and equity capital markets (ECM) teams across the UK, Europe, and Asia. Since the announcement, there have been complaints that the wrong individuals were let go, highlighting underlying issues within HSBC’s structure and cost base. One managing director summarized the situation by stating, “There are too many expensive, senior buffalos at HSBC and not enough hunters.”

The primary concern raised by insiders is the size of HSBC’s M&A execution team, which, even after being reduced by half in recent years, still consisted of over 100 individuals at the start of this year, many of whom held senior positions. Comparatively to other banks, HSBC’s focus on dedicated execution teams is significant. In most institutions, the heavy lifting is done by sector-focused coverage bankers, complemented by specialized product teams and skilled execution professionals. However, at HSBC, there seems to be an excess of costly execution personnel who do not necessarily contribute proportionally to revenue generation.

Kamal Jabre, the global head of M&A at HSBC, oversees the execution team and has a reputation as a top dealmaker. However, critics argue that the dismantled sector specialists and product teams were the real drivers of successful deals, emphasizing the importance of focusing on revenue-generating roles rather than excessive execution support.

Insiders have pointed out that the redundancies within HSBC have created overlaps and a political work environment. Various teams, including corporate bankers, investment bankers, sector specialists, product teams, and the M&A execution team, often overlap in responsibilities, leading to a complex and competitive landscape. Success is claimed from multiple directions within the organization, causing tension and inefficiencies.

While the initial round of cuts has been completed, further reductions are expected in the future. Some employees have been offered incentives to stay until at least 2026, indicating a phased approach to the restructuring process. Notably, key figures like Kamal Jabre and Alex Paul, the global co-head of technology and FIG banking, are being retained, raising questions about the bank’s strategic decision-making in retaining certain individuals over others.

Overall, the sentiment among senior insiders is that HSBC’s cost-heavy model, particularly within the M&A division, is unsustainable and inefficient. The focus on execution rather than revenue generation has been a point of contention, with many suggesting that a more streamlined and revenue-focused approach would better position the bank for future success. As HSBC navigates through these changes, the effectiveness of its restructuring efforts and the impact on its overall performance remain to be seen.