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There will be some cuts to Canadian staff, but the bank was unable to say if they would result in net losses. “Canada is one of the countries that has been identified as performing well,” said Sharon Wilks, HSBC Canada head of media relations. “There will be cuts in some areas even as we will be hiring in areas that represent growth opportunities.” The bank is cutting US$100 billion in assets over the next three years as it reduces its U.S. and European footprint and focuses on Asia and the Middle East. (The Logic)

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Talking point: While the bank as a whole is struggling, HSBC’s Canadian operations are doing well. In 2018, HSBC Canada announced it was opening more branches, and HSBC highlighted Canada as a “strong performing franchise” in its 2019 annual financial results, emphasizing that its return on tangible equity in the country hit 12 per cent. By comparison, HSBC’s global net profit dropped 53 per cent in 2019. HSBC plans to combine its private-banking unit with retail and wealth management globally, but only the latter division operates in Canada. The bank has increasingly challenged the Big Six for market share. Last week, The Logic reported HSBC wants the federal government to require banks to share information with fintechs, even as other large banks urged caution. RBC, BMO and CIBC have all reported cuts in recent months.

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The cuts come on top of a 4,700-person reduction announced in August. The bank’s current headcount is about 238,000.(Financial Times)

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Talking point: Global banks are shedding staff rapidly this year. In August, Deutsche Bank said it would eliminate 18,000 people. In September, Commerzbank announced plans to cut 4,300. All told, cuts announced by banks around the world prior to the HSBC news were around 60,000 in the first nine months of 2019. Many of the cuts are in Europe, where banks are up against a slowing economy and negative interest rates. HSBC’s European division, for example, lost £520 million in the first half of 2019, the only region to record a loss. Economic conditions are only part of the story. Automation will allow U.S. banks to cut 200,000 jobs in the next decade, according to a report from Wells Fargo. Canadian banks aren’t seeing the deep cuts of their European counterparts, but it’s unclear whether they’re as poised to benefit from technology as U.S. firms, either. American banks are spending US$150 billion annually on technology. RBC, Canada’s biggest bank, announced a plan to spend $3.2 billion last year.

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The tool, which was originally designed to flag suspicious activity, combines clients’ banking history with publicly available data on company ownership and directorship to identify attractive potential clients. (Reuters)

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Talking point: Noel Quinn, HSBC’s interim CEO, has made data analytics a major priority. Like many global banks, HSBC is struggling with trade tensions—a particular concern for a firm that makes much of its money facilitating commerce between the East and the West. In August, the bank announced it would cut 4,700 jobs and oust then-CEO John Flint after just 18 months in the position, citing board concerns about a challenging global environment and a need for strategic redirection. The data-focused Quinn stepped in shortly after. This algorithm was originally developed in 2012 as part of a US$1.9-billion settlement with U.S. authorities after a high-profile scandal that saw HSBC was convicted of failing to stop money laundering by drug cartels in its Mexico division.

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The bank’s internal investigation between 2016 and 2017 found that Huawei Technologies maintained close financial ties to a suspected front company in Iran called Skycom, years after it had purportedly sold the unit. At the time, the bank was trying to get the U.S. Department of Justice to drop charges against it for allegedly violating U.S. sanctions on Iran. The findings of the probe inform the current criminal case against Huawei CFO Meng Wanzhou. HSBC is not under investigation in the case.(Reuters)

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Talking point: HSBC is one of the victims in the U.S. case against Meng, who is accused of conspiring to defraud it and other banks that cleared more than US$100 million of transactions involving Skycom. Meng remains under house arrest in Vancouver, awaiting extradition to the U.S.

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Canada’s fifth-largest bank is facing pressure from investors to cut costs, as it grapples with an underperforming retail division and mounting expenses, according to sources who spoke to The Globe and Mail. Christina Kramer, head of personal and small-business banking, is expected to replace Kevin Patterson as head of technology and operations; Patterson plans to retire this year. Laura Dottori-Attanasio, current chief risk officer, will reportedly replace Kramer. (The Globe and Mail)

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Talking point: The cuts—if the board approves them—will follow mass layoffs at BMO, which, in December 2019, announced 2,300 employees would lose their jobs in what amounted to the deepest cuts any Canadian bank had experienced in over 15 years. The financial institutions are the latest to join a global trend of banks shedding revenues and employees. HSBC said this week it would cut 35,000 jobs and US$4.5 billion in spending by 2022. European and U.S. banks cut 30,000 people in summer 2019, after revenues at 12 of the top banks in those markets dropped 11 per cent in the first half of that year. RBC, which reported first-quarter earnings on Friday, appears to be bucking the trend: it announced an 11 per cent rise in quarterly profit, driven largely by 35 per cent growth in its capital markets division compared to the same quarter last year and a seven per cent jump in retail banking.

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The first four days of the hearing featured Crown and defence submissions on whether the accusations the U.S. has levelled against Meng Wanzhou would constitute crimes in Canada. Defence lawyer Richard Peck told the court the case was “unique” because the victim—HSBC—was at risk because of U.S. sanctions on Iran, which Canada “has roundly rejected.” He said, “This is the type of case that tests our system.” (Business in Vancouver)

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Talking point: The case, which began on Monday, is the first stage of a historic legal proceeding. Meng’s defence lawyers argued that U.S. records on the Huawei case were “silent” on reputational risk, while Crown counsel argued, “Fraud, not sanctions violations, is at the heart of this case.” Meng’s detention has been an aggravating factor in tense relations between Ottawa and Beijing, and between China and the U.S.; while President Donald Trump signed an initial trade deal with China last week, he has said he would intervene in Meng’s case if it would help get a better deal between the two countries. Associate Chief Justice Heather Holmes may take a few months to issue a decision on the double-criminality test. Court dates so far are tentatively scheduled until November.

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The cuts will affect about 2,300 people across all parts of the bank’s operations. It reported net income of $1.2 billion for the quarter ending October 31, a drop from about $1.7 billion last year. (The Logic)

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Talking point: These are the most dramatic staff reductions by BMO, or any Canadian bank, in more than 15 years. Until now, Canadian financial institutions have largely avoided the cuts roiling global banks, which have eliminated more than 75,000 positions so far this year. BMO is looking to reduce costs while increasing its efficiency ratio, a measurement for how much it spends to create a dollar of revenue. It’s currently at 60 per cent, but it’s looking to hit 58 per cent by fiscal 2021. U.S. banks will cut over 200,000 staff in the next decade as automation allows firms to replace humans, according to an October report from Wells Fargo. That’s possible in part because of their US$150-billion annual investment in technology. Canadian banks are spending a fraction of that.

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The Royal Bank of Canada is the only Canadian bank underwriting the Saudi oil giant’s planned IPO, which was postponed again in mid-October, three days before its expected launch in Riyadh. Its inclusion in the list of banks involved confirms a Bloomberg report from September. (Globe and Mail, Bloomberg)

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Talking point: RBC is listed as a “foreign joint bookrunner,” which means it will sell shares to institutional investors but play a less important role than the major banks underwriting the deal, including Goldman Sachs and HSBC. The world’s biggest IPO has faced significant investor skepticism over the firm’s desired US$2-trillion valuation, opposition from environmental groups and in September, drone strikes that temporarily halved its oil production. Canada and Saudi Arabia have been engaged in a diplomatic feud following criticism by Foreign Affairs Minister Chrystia Freeland over the kingdom’s arrest of women’s rights activists; RBC is betting on a successful public launch despite the tension, though it risks reputational and financial fallout if the firm underperforms on returns or suffers further supply shocks down the line.

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Senior White House adviser Jared Kushner discussed the U.S.’s role in international trade on the first day of the Future Investment Initiative conference in Riyadh. In an afternoon speech, Indian Prime Minister Narendra Modi said his country will spend US$100 billion on oil and gas refining, pipelines and terminals by 2024. U.S. Treasury Secretary Steven Mnuchin, U.S. Energy Secretary Rick Perry and Brazilian President Jair Bolsonaro are scheduled to speak on Wednesday. (The Logic, The Indian Express)

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Talking point: Last year’s summit came days after the Saudi government confirmed the murder of Washington Post journalist Jamal Khashoggi at its Istanbul consulate. (It disputed a UN report that says it is responsible for an “extrajudicial killing.”) Mnuchin—along with the chief executives of Uber, HSBC, Credit Suisse and Standard Chartered and SoftBank’s Masayoshi Soncancelled plans to attend. This year, HSBC’s interim chief is attending, as are the bosses of investment giants Blackstone and BlackRock. While there aren’t many Big Tech names on the agenda, executives from some startups—like Virgin Hyperloop One, which also backed out last year—are speaking. Son is in Riyadh, as well, as he seeks the Saudi sovereign wealth fund’s backing for his second technology fund. Despite tensions between the Canadian and Saudi governments, Vancouver-based 1QBit, a quantum-computing firm, is listed as a technology partner for the event. It did not respond to The Logic’s request for comment by deadline.