HSBC Holdings is intensifying its cost-control initiatives by canceling some internal events and reducing company travel. These steps come as the new CEO, Georges Elhedery, aims to manage expenses closely ahead of the third-quarter earnings report.
The bank has recently scrapped a business banking summit in India along with other global events. Employees have been informed that internal travel will be restricted until the end of the year, with some plans facing delays or cancellations, affecting even senior management. Travel deemed essential for client meetings remains permitted.
Under Elhedery's leadership, HSBC is focusing on cost containment as central banks worldwide begin to cut interest rates, posing a risk to multinational banks' profits. In its largest market, Hong Kong, HSBC has lowered its prime rate for the first time since 2019. The bank has slowed recruitment and directed investment banking staff to control travel and expenditure.
Elhedery has communicated the importance of expense control during his first company-wide meeting in Hong Kong. Research suggests he needs to find ways to cut $2 billion in costs to maintain a critical measure of the bank's profitability. HSBC's operating expenses rose by 5% in the first half of the year to $16.3 billion, driven by increased technology spending and performance-linked pay. The bank expects similar growth in spending for the entire year.
Investors are hopeful that Elhedery will announce new spending targets or detailed plans to manage the bank's efficiency ratio, an indicator of the cost incurred for every dollar of revenue generated. HSBC plans to release its third-quarter results soon.
As Europe's largest bank, HSBC is also considering merging its commercial and investment banking divisions to eliminate redundant positions and reduce costs.
