By Selena Li
HONG KONG (Reuters) – HSBC is reducing staff numbers at its China digital wealth business Pinnacle by nearly half, or about 900 people, two sources said, a sharp reversal of the bank’s ambition for the unit as part of its expansion plans in that country.
Pinnacle was launched in 2020 and sells insurance and fund products through a digital platform in China. It employed about 2,100 people at two of its main units as of the end of June last year, according to Reuters’ calculations based on company disclosure and official business records.
The reversal underscores the challenges the Asia-focused bank faces to boost growth and profitability in China at a time when it is slashing costs to boost returns.
Reuters reported in October that Europe’s largest lender by assets earlier last year started probing staff compensation structures and whether suppliers had inflated expenses, contributing to a sharp spike in costs that outpaced revenue at Pinnacle.
The staff reduction involves layoffs, natural attrition and transfers to other units within the banking group in China, said the two sources, who have direct knowledge of the matter but declined to be identified due to the sensitivity of the matter.
The London-headquartered bank’s new CEO, Georges Elhedery, has launched a sweeping restructuring exercise, involving job cuts, to reduce long-term costs and boost profits at the bank.
More than 500 insurance agents have already left Pinnacle in the past seven months, from around 1,700 in June, said the sources, mainly as its insurance brokerage unit stopped renewing job contracts after the launch of the review.
The banking group will soon start laying off around 100 staff at the Pinnacle fintech arm, with another 300 staff to be assigned to other business entities, such as its retail bank, leaving only a few dozen at the 400-people unit, they added.
Numbers are subject to final discussions, the sources said.
HSBC, which makes the bulk of its revenue in Asia and counts China as one of its key markets, did not comment directly on the staff changes. But it said the bank has a long-term strategic commitment to mainland China as a priority market, which has not changed.
It will continue to invest in premier and global private banking, insurance and asset management in the mainland China market, a bank spokesperson said.
Pinnacle, part of the bank’s $6 billion investment in Asia committed in 2021, was meant to expand HSBC’s reach outside its limited physical branch presence in China through its reliance on digital.
The bank originally aimed to hire 3,000 wealth managers in China by 2025.
The reversal in HSBC’s digital wealth business ambition in China underscores the challenges foreign financial institutions face in that country.
U.S. fund manager Vanguard, which formed a joint venture with domestic fintech firm Ant Group in 2019 to offer digital fund portfolio services, had to end the partnership and exit the market in 2023, after the business struggled to take off.
(Reporting by Selena Li in Hong Kong, additional reporting by Engen Tham in Shanghai; Editing by Sumeet Chatterjee and Stephen Coates)
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