HSBC warns banking reforms could prompt more UK job cuts

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The Independent Online

HSBC has announced plans to cut 30,000 jobs, or 10 per cent of its global workforce, over the next three years and warned that redundancies could be even higher if the UK adopted a hardline approach to banking reform.

Unveiling a 3-per-cent rise in first-half pre-tax profits to $11.5bn, the group stepped up pressure on Sir John Vickers ahead of his final report on UK banking reform next month. Stuart Gulliver, HSBC's chief executive, argued that stringent regulations requiring banks to ringfence their retail operations could increase its job losses in Britain and "inform" the bank's review into whether to move its London head office overseas.

Mr Gulliver said the 30,000 job losses did not include any that might arise from regulatory changes, adding that "it will be very difficult to forecast what employment or the shape of the business in the UK will be until we know the recommendations".

The bank's warning came as it revealed that it missed its Project Merlin target for lending to small and medium sized British businesses in the first half. Under the government initiative, HSBC had agreed to step up lending to SMEs to £11.7bn for the year – implying £5.85bn in the first half – but it lent only £5.6bn. However, the bank is on course to meet its totallending target, making £22.7bn of new lending available, compared with a full-year target of £38.8bn.

HSBC reported a 131-per-cent jump in profits at its retail banking and wealth management unit, and a 31-per-cent increase in its commercial banking division. It benefited in particular from a 30-per-cent decline in loan impairment charges to $5.3bn as it continued to run down its disastrous Household International business in the US.

This helped HSBC to weather a 12-per-cent slump in investment banking profits as the European debt crisis hit trading revenues hard.

HSBC's UK retail bank reported a 29-per-cent rise in pre-tax profits to £843m, as the group increased mortgage lending by 35 per cent to £6.7bn.

Some 5,000 of the job losses announced yesterday have already been identified, including 700 positions in the UK which were announced in June. HSBC conceded there would be additional UK redundancies but would not give numbers ahead of Sir John's report next month.

In his report, Sir John will flesh out a number of new regulations, including the requirement for banks to ringfence their high street banking operations from riskier investment banking arms. In his preliminary report in April, Sir John suggested that banks be forced to increase the amount of top-notch tier one capital they hold to "at least" 10 per cent of assets, compared with the 7 per cent currently required by international regulators. This is an unpopular move in the industry since it would reduce banking profits.

HSBC said as many as 15,000 new jobs could be created in its fast-growing emerging market businesses in the next three years, so the net reduction in headcount could be as low as 15,000.