HSBC's cuts: "Too many buffaloes, not enough hunters"
It's nearly a month since HSBC sent a memo declaring that it was cutting M&A and equity capital markets (ECM) teams in the UK, Europe and Asia. And is often the case, the exits are prompting complaints that the wrong people were let go.
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Multiple senior sources at the bank claim the cuts didn't address the foibles of HSBC's structure, and that the bank still has a bloated cost base. "There are too many expensive, senior buffalos at HSBC and not enough hunters," says one managing director. "They've taken out the product specialists and kept a lot of the execution people who should really have been let go."
The root of the complaints is HSBC's large M&A execution team. Although this was halved in recent years, even before the February cuts, sources say that at the start of this year it still amounted to over 100 people, many of them comparatively senior.
"A lot of banks don't have these kinds of dedicated execution teams, but ours was huge," says one senior HSBC banker. "In most banks, you would have the headcount in the origination roles, with the heavy lifting done by the sector-focused coverage bankers, and then some Jedi-execution people," says another senior HSBC insider. "But here, we have a lot of these expensive execution people who just generate costs and barely bring in the revenues."
The M&A execution team at HSBC is run by Kamal Jabre, the bank's global head of M&A, who is understood to be staying with the bank. Jabre joined in 2018 after two decades as a financial sponsors banker with Morgan Stanley. He regularly ranks as a top dealmaker on MergerLinks' list, but naysayers say Jabre is primarily a manager and argue that it was the heavily dismantled sector specialists and product teams who really brought in the deals.
"The execution team at HSBC don't really do much," insists one of the sector bankers who's being let go. "It makes no sense. They could have taken out a huge amount of cost by letting them go and kept revenues the same. It would have given them optionality to increase revenues in future. Instead, they're cutting off their nose to spite their face."
HSBC declined to comment for this article, but the comments were echoed by multiple senior insiders. "It's a cost-heavy model. The M&A guys are mostly just execution people who wait for the deals to role in," says one.
Sources say the overlaps were responsible for making HSBC a particularly political place to work. "There are corporate bankers, investment bankers, sector teams, product teams and the M&A execution team," says one senior source. "Success has many parents, and every time a big project was won, everyone would come out of the woodwork to claim their part in it."
For the moment, HSBC has made a first round of cuts. Additional rounds are expected, but some bankers are being paid to stay until at least 2026. Others, like Jabre, are seemingly being kept on indefinitely. Alex Paul, the London-based global co-head of technology and FIG banking, is understood to be staying on too.
Photo by Simon Maage on Unsplash
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