Inflation is driving expenses significantly higher at HSBC, requiring it to be «brutal» on costs in order to meet financial targets.
HSBC aims to limit cost growth to no more than 2 percent but based on its current trajectory it is seeing a potential 6-7 percent rise in underlying expenses, and it could fall short of its full-year target by $500 million, according to chief financial officer Ewen Stevenson.
«We are seeing pretty broad cost inflation,» Stevenson said at a New York conference hosted by Barclays, adding that half of the bank’s costs are in fixed pay and that this could «materially» increase in 2023.
Control Over Growth
According to Stevenson, the «only way» to resolve this issue is to be «pretty brutal internally on costs», adding that he and chief executive Noel Quinn both have a «bias to focus on cost control over revenue growth».
«A lot of it depends on the CEO’s commitment,» according to a «Bloomberg» report of the conference that cited Stevenson. «He has been pretty clear internally that he intends to hit that 2 percent cost target. So as long as he wakes up every day feeling that, I feel like I’m in a good place.»
Ping An Discussion
HSBC also spoke about Ping An’s breakup call, noting that while it disagrees with the proposal, it was still in dialogue with the Chinese insurer and the bank’s largest shareholder.
«Where we have agreement is the bank has been underperforming,» he said. «The structural alternatives, I think we have a clear difference of view.»
In addition, Stevenson also said that he expects share buybacks to resume in the second half of 2023, in line with its previous statements that further buybacks in 2022 would be unlikely.
