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HSBC to limit retail banking to save $3.5bn

London, May 11, 2011

HSBC Holdings, Europe's biggest bank, is looking to slash up to $3.5 billion in costs by cutting the scale of its wealth management and retail banking businesses, it said.

It was also conducting a strategic review of its credit card business in the United States, HSBC chief executive Stuart Gulliver said. If sold, HSBC could release $25 billion from the operations, analysts at Barclays Capital had said before the statement.

Cutting costs would help the bank reach a cost efficiency ratio of 48-52 per cent by 2013, HSBC said in a statement posted on the Hong Kong stock exchange.

"We will increase capital deployment discipline, directing investment to faster growing markets and businesses as we scale back elsewhere," Gulliver said in a statement.

The extent of Gulliver's task to streamline and revive Europe's biggest bank was laid bare on Monday, after a jump in costs helped drag quarterly profit 14 percent lower.

HSBC would focus its wealth management business in 18 of the most relevant economies, and limit retail banking to markets in which it can achieve profitable scale, it said. Currently, the bank has operations in about 87 markets.

HSBC did not identify the 18 economies it would focus on. The bank would also target a dividend payout ratio of 40-60 percent, while maintaining its return on common equity at 12-15 percent, the bank said.

That "could free up both some costs and also some capital to invest into higher-growth markets like Asia or Latin America," said Tom Quarmby, analyst at Barclays Capital in Asia. - Reuters




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