This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

HSBC Makes U.S. Banks Look Fat and Lazy

Stocks in this article: HBC BAC C JPM WFC

NEW YORK ( TheStreet) -- HSBC (HBC) is already firing on all cylinders as the company continues its remarkable turnaround, but the company on Wednesday announced plans to maintain its already impressive efficiency ratio.

HSBC CEO Stuart Gulliver said in a press release that "we have announced the closure or disposal of 52 non-strategic or underperforming businesses since the beginning of 2011 , achieved US$4bn of annualized sustainable cost savings and generated double-digit loan growth in 15 priority markets. HSBC is now simpler, easier to manage and ready to take advantage of growth opportunities."

As part of the company's "unchanged" strategy, HSBC is aiming for an additional $2 billion to $3 billion in annual cost savings.

HSBC, headquartered in London, is the world's second largest bank, with $2.7 trillion in total assets as of March 31. The company on May 7 reported first-quarter earnings of $8.434 billion, increasing from $4.322 billion during the first quarter of 2012. The bank's first-quarter return on average equity (ROE) was a solid 14.9%, improving from 6.4% a year earlier.

A major component of the bank's turnaround has been a reduction in its exposure to the U.S. market, including the sale last year of roughly 200 branches in upstate New York to First Niagara Financial Group (FNFG) and other banks, and also selling its entire U.S. credit card portfolio to Capital One Financial (COF).

HSBC's long term goal is to continue focusing on building its business in countries with high GDP growth, while maintaining ROE in a range of 12% to 15%.

The company's first-quarter underlying cost efficiency ratio was an impressive 53.2%, improving from 56.9% a year earlier. The efficiency ratio is, essentially, the number of pennies of overhead expense incurred for each dollar of revenue. Lower is better.

While these are not necessarily fair comparisons, here's how efficiency ratios stacked up for the "big four" U.S. banks during the first quarter:

  • Bank of America (BAC) reported a first-quarter efficiency ratio of 76.57, improving from 85.13 in the first quarter of 2012. As housing prices in the United States continue to recover, and as the company keeps working through its problem loans, repossessed property and mortgage repurchase demands, its efficiency ratio should improve significantly over the next two years.
  • Citigroup (C) reported a first-quarter efficiency ratio of 61%, improving from 63% a year earlier. With the continued wind-down of Citi Holdings and the massive cost-cutting program announced in December, Citigroup's efficiency ratio should continue to improve.
  • Wells Fargo (WFC) reported an efficiency ratio of 58.3%, for the first quarter, improving from 60.1% a year earlier.
  • JPMorgan Chase's (JPM) first-quarter efficiency ratio was 62.66, increasing from 59.77 a year earlier, according to Thomson Reuters Bank Insight.

In its presentation on Wednesday, HSBC outlined some areas that presented clear opportunities for cost savings. For example, the company has 1,100 facilities management vendors. The company recently contracted a single vendor to manage all of its facilities.

1 of 2

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,914.55 +109.75 0.62%
S&P 500 2,075.76 +5.11 0.25%
NASDAQ 4,777.7890 +12.4090 0.26%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs