HSBC to Cut 900 Jobs at China Pinnacle Unit: Report

According to two sources, HSBC is cutting around 900 positions, which is almost half the staff at Pinnacle, the bank’s China digital wealth business. This marks a strong reversal of the bank’s growth ambitions for the unit as part of its expansion plans in China. 

Pinnacle was founded in 2020 and sells insurance and fund products through a digital platform in China. As of mid June last year, it staffed approximately 2,100 people spread across its two primary offices, per Reuters estimates from company disclosures and official business records.

The reversal demonstrates the difficulty the Asia-focused bank has had in increasing growth and profitability in China while it simultaneously attempts to reduce costs to increase return.

In October to this year, Reuters has reported that Europe’s largest lender by assets last year inquired into staff compensation structures and whether there was unnecessary overcharging of expenses which aided in the increase in costs while revenue at Pinnacle was at a stand still.

The cutbacks include dismissals, voluntary resignations, and movements to different departments within the bank in China, said two people familiar with the issue and who spoke on condition that they are not identified due to the delicateness of the issue. Georges Elhedery, the new CEO of the bank, is implementing an extensive restructuring program which includes a new job reduction policy to enhance a long-term strategy of effectively cutting costs and increasing the bank’s profitability. 

The sources added that ever since the brokerage unit began its review and ceased renewing contracts, over 500 insurance brokers have exited from Pinnacle in the last seven months, down from the 1,700 employed in June. 

According to them, the banking group is getting ready to commence the termination of the contracts of about 100 employees in the Pinnacle fintech division, while another group of 300 employees will be offered to other divisions of the company, which include the retail bank, leaving only several dozens at the unit which numbered 400. 

The sources noted that the numbers are still uncertain pending the final discussion.

HSBC did not specifically address the staff turnover, but considering that China is one of the key markets for HSBC, which earns most of its profits from Asia, the bank said it has not changed its long term strategic commitment to mainland China as a priority market. 

A bank spokesperson stated that, “We will continue to invest in premier and global private banking, insurance and asset management in the mainland China market.” He further noted that in 2024 the bank grew wealth invested assets in mainland China by 61 percent over the previous year. 

HSBC’s digital pullback in the China wealth market is swift and stark in comparison to their other strategy to massively ramp up their wealth management business in Asia, particularly after divesting from other less developed markets, which was their focus after the China wealth business. 

Elhedery last week stated that the bank is focusing on augmenting their wealth business, especially in Asia, and for this reason, the Greater China region, which includes Taiwan and Hongkong, is the group’s most significant revenue producing area.

HSBC’s wealth and personal banking unit, which Pinnacle is a part of, hasn't made any profit in China, but it is working on making a profit. Compared to last year, their unit loss in China narrowed down to 46 million dollars from 90 million dollars. 

The Pinnacle Program was designed to help grow the bank’s reach outside of China’s limited branch network that is run by physical branches. This was a part of HSBC’s expansion plan in Asia in 2021, which relied on digital first strategy.

The bank initially set out to recruit 3,000 wealth managers across China by the year 2025. 

The changes made in HSBC's methods to reach their digital wealth goals through China reiterate the struggles that foreign companies operating there have to face. 

Vanguard, the American fund manager, partnered with the local fintech company Ant Group in 2019 to provide digital portfolio services. However, due to unsuccessful performance, had to retract from u41n the deal and ultimately the market in 2023.