Friday, March 18, 2005
HSBC set to offshore more jobs
Ft Reporters / Kuala Lumpur March 17, 2005
Global bank HSBC Holdings expects to double its Asian back-office workforce in three years and axe more clerical jobs in the West to help it save more than $1 billion, a top executive said on Wednesday.
The world’s second-largest bank by market value has 13,000 workers in 10 global back-office service centres around Asia, providing mainly clerical and phone support and replacing jobs in higher-cost centres in the United States and Europe.
“I don’t have a precise target but I would be surprised if we had less than 15 (global service centres) in three years’ time and very surprised if we had less than 25,000 people working in them,” Chief Operating Officer Alan Jebson told reporters.
Jebson, speaking on a visit to Malaysia, where the bank has its biggest global service centre employing about 2,000 people, has a target to save more than $1 billion in the four years ending December 2007 and is accelerating the move to low-cost locations.
This trend of “offshoring” has provoked a backlash in the West, where clerical work such as processing forms and making credit checks has been shifted to lower cost centres, especially in Asia.
Jebson said the backlash was confined mainly to the Western media and some politicians and he did not expect the bank’s aggressive expansion - involving the creation of 500 service-centre jobs a month - would present political obstacles.
“It’s not yet affected what we are trying to do,” he said, adding the bank saved about $20,000 for every job it moved. “In the end, it would take a reaction from customers and we have not had a significant adverse reaction from customers. Politicians and media can do their worst but in the end it’s the customers that matter.”
Offshoring has raised a storm of controversy in the United States and Europe, where trade unions have blamed it for job losses and for allowing bosses to screw down wages at home.
HSBC has four global service centres in India, three in China and one each in Malaysia, the Philippines and Sri Lanka. HSBC is to formally open a fifth Indian centre in Calcutta in November.
It is also considering setting up a new centre in Vietnam, where low costs and populations of English and French speakers could make it suitable, Jebson said. A new centre usually costs the bank $20m to $30m to set up.
“You could say it (Vietnam) is at the top of our prospects list,” Jebson said.
Costs are coming increasingly under the microscope at HSBC after major acquisitions in 2003 and last year. It tied itself to the US consumer by buying lender Household for $14.8 billion in March 2003, but operating net income at its US consumer-finance business fell last year.
HSBC’s share price has fallen 1-2 per cent since its 2004 results on February 28, as some investors question whether profit growth justifies its premium rating. HSBC’s London stock trades at about 13 times prospective earnings per share, a premium to rivals like Citigroup and Lloyds TSB.
The man who has to find $1 billion in cost savings for HSBC said it was hard to calculate how much of this would hit the bottom line, given some would be reinvested in growth areas like investment banking, which the bank is beefing up.
HSBC’s average cost-to-income ratio is around 51-52 per cent, Jebson said. “We would like to get it down well below 50 per cent,” he said, adding he was track for the savings target.
“We are on track but I would not say there’s a lot to spare. It’s a very ambitious programme and we do have to keep on going strongly in order to achieve these objectives,” he said. “But at the moment I am confident we will.”