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| "The reasons for holding our stock in a crisis become less relevant in recovery and, in our view, we now risk losing ground to more agile competitors" |
Last month HSBC outlined ambitious plans to boost its lacklustre return on equity by sharply cutting costs, exiting some non-core retail banking businesses and allocating capital in a much more disciplined way than in the past to remaining businesses. The bank’s new senior management team, led by chief executive Stuart Gulliver, invited analysts and investors to listen to a whole day of presentations from the executives running HSBC’s most important businesses and geographies on how they will achieve $2.5 billion to $3.5 billion of annual cost savings, reduce the cost-income ratio from 55% to between 48% and 52%, and boost returns on equity from the 9.5% achieved in 2010 up to between 12% and 15%.
HSBC had a good credit crisis, thanks to the abundant funding husbanded through a conservative advances-to-deposits ratio of about 80% and similarly conservative capital ratios. It remained sufficiently profitable throughout the calamities that beset the developed-world banking system from 2007 to have paid out $31 billion in dividends over the past four years, a total surpassed only by China’s ICBC.
