HSBC is set to significantly scale back its investment banking operations in the UK, Europe, and the United States as part of a strategic restructuring led by CEO Georges Elhedery. According to an internal memo leaked on Tuesday, the bank will shut down its mergers and acquisitions (M&A) advisory and equity capital markets (ECM) businesses in these regions. This move is part of the bank's wider effort to streamline operations and refocus on its core strengths in Asia and the Middle East, where it sees greater growth potential.

The decision marks a major shift in HSBC's investment banking strategy. While no exact figures have been disclosed, the closure of these operations is expected to lead to job losses across its London and New York offices, although HSBC continues to employ a global workforce of 220,000. The bank has stated that the winding down of its M&A and ECM activities in the UK, Europe, and the US will proceed in compliance with local legal requirements.

HSBC’s exit from these markets reflects a broader strategic refocus on regions where the bank has a competitive edge, particularly in debt capital markets, leveraged finance, and infrastructure finance, which will continue in the US and Europe. The decision comes after it was revealed that investment banking revenues accounted for just 6 percent of HSBC’s global income in the first half of last year. A source familiar with the matter described HSBC’s attempts to build a competitive investment banking presence in these regions as a "tough job" that ultimately failed to gain the necessary traction.

This restructuring initiative is part of Elhedery’s broader strategy to simplify HSBC's operations. As part of his cost-cutting efforts, the bank has set a target of $300 million in savings, with reductions already underway in senior management positions. Notably, senior leaders such as Annabel Spring, the head of global private banking and wealth, and Celine Herweijer, group sustainability officer, have both departed as part of the bank’s changes.

Elhedery’s leadership is seen as a shift toward efficiency, with an emphasis on reducing costs and enhancing digital innovation. HSBC is bracing for a future where lower interest rates, following a period of rising rates, may weigh on profits. In light of this, HSBC intends to transition to a more "competitive, scalable, financing-led model," according to Michael Roberts, HSBC’s Chief Executive.

The exit from the M&A and ECM markets outside Asia is expected to have broader ramifications for London’s position as a global equity capital market hub. HSBC serves as a broker or joint broker to over 25 UK-listed companies, including household names like easyJet, Boohoo, and Pets at Home. Many of these companies will now be forced to find new advisory services.

The restructuring follows HSBC’s acquisition of Silicon Valley Bank UK in 2023, which initially raised expectations for a stronger focus on technology-driven investment banking. However, the decision to retreat from M&A and ECM has cast doubt on these ambitions. Instead, HSBC is now doubling down on Asia, where the bank generates the majority of its profits and where it sees the most promising growth prospects.

As the global banking landscape remains volatile, HSBC’s refocused strategy aims to weather the economic storm. By consolidating its operations and streamlining its business, HSBC hopes to deliver significant savings, even as it faces consequences for its operations in the West. This move mirrors broader trends in the banking industry, with banks like Barclays and NatWest also focusing on efficiency as they adjust to shrinking profit margins due to falling interest rates.