HSBC Holdings Plc (HBC, HSBA.L) expects its cost savings to touch the top end of its target by the end of next year, as the Europe's biggest lender sheds its non-strategic businesses. Ahead of an investor update Thursday, the company also reaffirmed its financial targets.
HSBC has so far achieved $2 billion sustainable cost savings on an annualised basis. The company expects to hit the top end of the savings target of $2.5 billion to $3.5 billion by the end of 2013.
The company integrated four global businesses, generating incremental revenue of $0.5 billion in 2011 and an additional $1.5 billion is expected in the short to medium term.
Stuart Gulliver, Group Chief Executive, said, "Closer integration between our four global businesses and disciplined capital allocation will position HSBC to capture growth. We have increased by an additional US$1bn our assessment of the potential extra revenue achievable from business integration in the short to medium term. We will commit capital to organic growth opportunities in priority growth markets."
HSBC will continue to run off its legacy assets, including the US consumer and mortgage lending book. The firm is restructuring its US operations and repositioning the Global Private Banking business, while adapting to the regulatory challenges posed to Global Banking & Markets products.
Since the beginning of last year, 28 transactions were announced to dispose of or exit non-strategic businesses, potentially releasing $55 billion in risk-weighted assets.
Gulliver added, "We are reaffirming our targets, and, while market conditions and changing regulatory costs will continue to influence our performance, we have clear and robust programmes in hand to manage costs and capture opportunities for growth."
The lender continues to expect to achieve return on common equity of 12-15 percent, cost efficiency ratio of 48-52 percent and a common equity tier 1 ratio of 9.5-10.5 percent.
The firm has been offloading non-core assets as the banking sector is faced with increased capital requirements and regulatory scrutiny. Among its latest disposals, HSBC said last week that it has agreed to sell its businesses in Colombia, Peru, Uruguay and Paraguay for a total consideration of $400 million in cash.
While announcing the quarterly results early this month, the bank said it continued to make good progress in implementing its strategy and continued to reduce costs.
HSBC is holding the update on its group strategy for investors and analysts at its London headquarters.
HSBA.L closed on Wednesday at 534.20 pence, down 13.41 pence or 2.45 percent, on a volume of 27.36 million shares.
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