HSBC's cuts are being consumed by inflation & severance payments

HSBC has decided to cut costs this year by more than it initially planned. 

The bank said today that it will be cutting $0.4bn of costs in 2025 instead of the $0.3bn it initially intended. Some of these costs will come from the shrivelling of the investment bank.

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HSBC unexpectedly revealed its intention of closing its equity capital markets (ECM) and M&A activities outside Asia and the Middle East in late January. Since then, it's been cutting in its equities sales and trading business too. The bank said today that cost-cutting in ECM and M&A in the US, the UK and Europe is "ongoing."

Despite the disruption, HSBC's investment bankers increased revenues nearly 15% year-on-year in the first half of 2025. The bank doesn't break out banking revenues by product line, so this might be attributed to untouched debt capital markets bankers, or to a last M&A and ECM hurrah as businesses wind down.

In sales and trading, HSBC's first half revenues rose 32% to $1.5bn. In 2023, however, the bank was making $3bn trading FX, debt products and equities.

Amidst this year's cuts, HSBC is also spending more. While it's extracting $400m from costs in 2025, it's also spending $1.2bn on severance pay and "upfront costs." It's spending another $500m on "inflation and investment." 

At the end of its simplification efforts in 2027, HSBC expects to have removed $1.5bn from the bottom line.

HSBC's efforts are focused on growing corporate banking rather than the investment bank. Today's list of investment initiatives are focused on trade finance, working capital and payments. HSBC's corporate and investment bank is run by Michael Roberts and Gerry Keefe, two corporate bankers from Citi.  

The cost impact of HSBC's simplification:

Source: HSBC

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