HSBC cost cuts set to lift profits as CEO faces growth challenge

Sun Feb 23, 2014 6:07pm EST
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By Steve Slater

LONDON (Reuters) - HSBC's (HSBA.L: Quote) profits are expected to rise by almost a fifth to $24 billion for 2013 as it benefits from a cost-cutting drive that spans managing its documents more efficiently to telling staff to use business class air travel less.

Chief Executive Stuart Gulliver has sold or closed 60 businesses, axed 40,000 jobs and taken a knife to costs since taking over three years ago, and last year's operating costs are expected to tumble $5 billion from 2012 and lift profits.

Analysts expect Gulliver to keep a tight rein on costs and said his bigger challenge is to increase revenue at Europe's biggest bank by market value.

Economic growth in Asia has slowed and HSBC has lost income after offloading its U.S. credit cards business and half of its U.S. branch network, and selling its stake in Chinese insurer Ping An, and Gulliver needs to show how to replace that.

He said in November economic growth in Hong Kong and Britain should underpin its two core markets this year and he was confident China and the rest of Asia-Pacific will grow.

Analysts said any improvement in revenue prospects would go down well with prospective investors, especially many institutions in Britain who will soon get a flood of cash from the $84 billion sale of mobile phone firm Vodafone's (VOD.L: Quote) stake in Verizon Wireless.

"Some evidence of revenue momentum and capital accretion may be met with a surprisingly robust increase in investor interest, particularly given the imminent receipt of substantial volumes of cash by Vodafone shareholders," said Deutsche Bank analyst Jason Napier.

HSBC's revenues last year are expected to be down about $2 billion from 2012 to $66.4 billion, reflecting the lost income from disposed businesses, weakness in some emerging market currencies, and lower investment banking revenue. Revenues are currently forecast to grow by less than 1 percent this year.   Continued...

The logo of HSBC bank is seen at its office in the Canary Wharf business district of London April 1, 2013. REUTERS/Chris Helgren