NEW YORK (The Deal) -- The U.K.'s HSBC on Tuesday initiated its second sweeping restructuring within just over four years, as it confirmed the sale of operations in Turkey and Brazil, but said it would hold on to and turn around units in Mexico and the U.S.
The London-based lender, Europe's largest bank by market value, said it plans to reduce risk-weighted assets by $290 billion, or a quarter, and cut up to 25,000 full-time jobs worldwide to save between $4.5 billion and $5 billion by the end of 2017.
It confirmed plans to sell operations in Turkey and Brazil, for which it has already begun auctions, in order to shed risk-weighted assets of a combined $110 billion. In Brazil, where suitors for its business include Banco Santander Brasil and Banco Bradesco, HSBC said it will maintain operations serving large companies operating internationally.
The greatest slice, or $140 billion, of HSBC's targeted $290 billion reduction in risk-weighted assets will come from slashing its investment banking unit so that it accounts for less than a third of its overall business, down from 43% at present.
"Overall, HSBC's planned restructuring is more than expected," noted Credit Suisse analyst Carla Antunes-Silva. "We think the market will initially welcome the planned capital reduction to the IB [investment bank], as well as the more extensive reductions to overall group RWAs."
But she suggested that an unchanged return on equity target of more than 10% in 2017 and static capital return targets were disappointing.
HSBC shares were down marginally by mid-afternoon in London. The company has market value of about £120 billion ($183.7 billion).
The sweeping restructuring comes after CEO Stuart Gulliver in May 2011 announced a global retrenchment to cut costs by up to $3.5 billion by the end of 2013. Those efforts included the sale of HSBC's 15.6% stake in Ping An Insurance to subsidiaries of Thai conglomerate Charoen Pokphand for about $9.4 billion, and the disposal of its U.S. credit cards business to Capital One Financial (COF) for $2.6 billion. HSBC sold or exited 78 businesses between 2011 and 2015.
But investors clamored for further measures to boost its sagging share price and profitability.
The company also on Tuesday said it will "pivot to Asia," prioritizing and accelerating investments in the region, including in China's Pearl River Delta and in southeast Asia. It will place a particular focus on building its Asian insurance and asset management operations.
HSBC is the No. 6 bank in Brazil, with $63 billion of assets, and the No. 12 in Turkey, with $15 billion.
HSBC said it is the No. 5 in Mexico as measured by customer deposits, with a 9% market share. It said it will "rebuild profitability in Mexico" with the aim of achieving $600 million in pretax profit in that market in 2017, up from $100 million in 2014.
In the U.S. it plans to "execute on key initiatives to deliver satisfactory returns in the U.S.," or boost pretax profit to $2 billion in 2017, the bank said in a presentation to investors. It didn't give a comparable U.S. profit figure in 2014 and doesn't split out results by country.
In the first quarter Latin America was HSBC's smallest region by pretax profit, pulling in $231 million, compared with $4.33 billion from Asia, its largest market, and $1.56 billion in Europe.
HSBC made $477 million first-quarter pretax profit in North America.
Its U.S. operations are held through New York-based HSBC North America, which had $290.1 billion of assets at year-end.
In the U.K., HSBC will cut 8,000 jobs, move its retail bank to Birmingham, England and decide whether to switch its global headquarters out of Britain by year-end. A move to Asia, and probably Hong Kong, is seen as likely.
"We think the financial logic for HSBC to escape the clutches of the UK (and Europe) is overwhelming. What possible reason is there to stay?" noted Investec Bank.
Media reports suggest Chancellor of the Exchequer George Osborne, in a bid to convince HSBC to stay in the U.K., may use a high-profile annual speech tomorrow evening to announce a plan to pare back a levy on banks' balance sheets that was introduced after the credit crisis and which he has increased regularly.
The levy is popular with the public but has been roundly criticized by banks.
Posted at 10:36 A.M. EDT, on June 9, 2015