On Monday, HSBC CEO John Flint announced his surprise exit. He became the group CEO in February 2018. According to the Wall Street Journal, after Flint’s exit, HSBC might cut thousands of jobs—mainly senior executives. Noel Quinn will serve as an interim CEO.
Mark Tucker, the group chairman, said, “In the increasingly complex and challenging global environment in which the Bank operates, the Board believes a change is needed to meet the challenges that we face and to capture the very significant opportunities before us.” Based on Reuters’ sources, there were disagreements between the CEO and chairman about executing the group’s strategy. However, in a conference call on Monday, Tucker denied any differences with the CEO about the group’s strategy.
In an interview with the Wall Street Journal, HSBC’s CFO, Ewen Stevenson, said that the job cuts would curtail the bank’s wage cost by 4%. The expected job cuts include a figure from layoffs plus attrition.
Economic slowdown has become a reality
HSBC could be the second European bank in the last two months to reduce its workforce strength. Earlier, Deutsche Bank announced a plan to reduce its global workforce. The job cuts were mainly aimed at Deutsche Bank’s global equities division. The slow equity market lowered the bank’s returns amid rising costs.
On a year-to-date basis, the S&P 500 Index (SPY) has risen 17%. However, similar trends were absent in other markets. The Vanguard European Stock Index Admiral (VEUSX) has risen 11%. Meanwhile, the iShares MSCI United Kingdom ETF (EWU) has risen 4.6%. The iShares MSCI All Country Asia excluding Japan ETF (AAXJ) has risen 3.3%, while the iShares Latin American 40 ETF (ILF) has risen 4.5%.
The US unemployment rate near a multi-decade low and the Fed’s decision to reduce interest rates could be the driving forces behind the S&P 500 Index. On March 22, the US 10-Year Treasury Constant Maturity Minus 3-Month Treasury Constant Maturity yield spread fell just below zero for the first time since August 8, 2007. In the last three decades, when the yield spread turned negative, a recession started the next year.