Incoming HSBC boss Georges Elhedery mulls middle management shake-up

New chief executive is thought to be considering a cull of country heads, as the global bank continues its refocus towards Asia

Georges Elhedery is expected to look at a management shake-up when he takes charge of HSBC on September 2. Mark Chilvers for The National

The incoming chief executive of global banking giant HSBC is thought to be considering a major shake-up of middle management after he takes over the role next week.

Lebanon-born Georges Elhedery, who is currently HSBC's chief financial officer, is believed to mulling cost-cutting measures similar to those undertaken at rivals Citigroup and Standard Chartered.

In its major overhaul, Citigroup is getting rid of five layers of management and tens of thousands of jobs.

Observers think that by simplifying the bank's network, HSBC could shed some middle manager posts, including certain country heads, as it continues its pivot towards Asia.

It is reported that HSBC, Europe's largest bank, has already embarked on a series of measures aimed at reducing expenses and has tightened the reins on hiring.

However, given the robust business in the GCC countries, HSBC's long and profitable history in the region is expected to continue. HSBC Bank Middle East, which was previously The British Bank of the Middle East, is the largest international bank in the GCC region.

Indeed, in March, Mr Elhedery told investors that “we recognise we can do more in other parts of Asia [beyond Hong Kong] and the Middle East”.

HSBC operates in 60 countries and territories, but Mr Elhedery is expected to consider initiating a plan to slimline and simplify the bank's considerable global operations.

There has been recent speculation that HSBC might sell its South Africa unit, following rumours that buyers from the UAE and China might be interested.

Another potential suitor for its South African assets could be the local banking group Absa, following its purchase of HSBC's retail and business banking units in Mauritius.

In recent years, HSBC has sold off some major businesses in the West, including its French and Canadian operations, and has redeployed capital, in particular, to South-east Asia and China.

Falling interest rates

Like all banks, HSBC, is now facing an environment of falling interest rates as central banks begin a period of monetary loosening, which will inevitably squeeze margins in the traditional lending business.

As such, in addition to a refocusing on Asia, HSBC is also looking to expand its wealth management business. In Britain alone, HSBC is looking to double the assets under management to £100 billion ($131 billion) within the next five years.

While concentrating efforts on generating fees in the wealth management sector is one answer to balance the tighter margins in lending as interest rates fall, some analysts see the market becoming quite crowded.

“The demand for wealth management services continues to grow … but competition is high as almost every major bank has now declared its ambition to take a bigger slice of the pie,” said Nigel Moden, EMEIA banking and capital markets leader at EY.

At the end of July HSBC said it had reduced its sensitivity to falling interest rates through an insurance strategy known as a structural hedge and announced a further $3 billion buyback of its own shares.