Tiger banks paying high price for talent
COMPARED to the billions-of-pounds worth of losses announced by RBS and Lloyds last week, HSBC’s record-breaking profit looks pretty impressive – even if it was flattered by an accounting gain. Like Standard Chartered, which reports tomorrow, HSBC is Asia-focused and free from the shackles of state control. That’s why the pair are in such rude health compared to their domestic counterparts
But make no mistake, these “tiger banks” have a serious problem of their own. Their costs are surging due to a shortage of bankers in fast-growing markets, leading to what StanChart boss Peter Sands has called a “war for talent”.
Just look at HSBC’s cost efficiency ratio for 2011, which grew substantially from 55.2 per cent a year ago to 57.5 per cent. HSBC chief executive Stuart Gulliver has said he wants to slash the ratio to between 48 and 52 per cent by 2013, but the direction of travel – let alone the speed – is wrong.
Whether Gulliver manages to hit the target depends on how effective a cost-cutter he is. He has already announced an ambitious savings programme, which aims to slash costs by as much as $3.5bn by the end of 2013.
No-one is saying that HSBC should not pay market rates for top-flight talent in fast-growing regions, but that is not the only reason costs have drifted higher. The bank is bloated with middle managers and needless bureaucracy.
In May last year, Gulliver unveiled a handful of efficiencies, including a £100m saving from “reduction of paperwork”, but these were small fry. If he has any hope of hitting his targets, he’ll have to cut some red meat – and fast.