The world's biggest banks, struggling with an economic slowdown and tougher regulations, are starting to reduce costs in Asia, which they have long touted as one of the key drivers of future growth.
One of Asia's iconic banks, HSBC Holdings PLC, said it would cut 3,000 jobs in its regional headquarters in Hong Kong over the next three years, showing that even areas considered the most strategic for financial firms aren't immune to the ax. The cuts are part of global cost reductions at the bank, which nearly two years ago moved the office of its global chief executive to Hong Kong so it could have a base in what it called its strategically most important region -- Asia.
Other banks have been cutting staff more quietly, and several top bank executives in Asia said the region wouldn't be immune to companywide cuts, though they would be proportionately smaller in Asia than in the rest of the world.
Last month, UBS AG said it will lay off more than 5% of its global work force, mainly at its investment bank, as the Swiss bank faces weaker earnings, tougher regulation and a surging franc. Bank of America Corp. announced 3,500 job cuts, with a possible total of 10,000 cuts, according to one person familiar with the situation. Credit Suisse Group said in July it planned to trim 4% of its work force after disappointing second-quarter results but hasn't specified where the cuts will be.
The cuts in Asia come at a time when investors have soured on banks, believing growth prospects are limited. Asia has been seen as one of the few growth areas for banks as cash-rich companies and increasingly wealthy individuals use the banks for everything from wealth management to stock offerings.
The HSBC cuts, announced by Asian-Pacific Chief Executive Peter Wong in a memo to employees, are in "support functions" and part of 25,000 jobs HSBC said last month will disappear by 2013. The lender has already cut 5,000 jobs in the U.S., the U.K., France, Latin America and the Middle East.
"For all of HSBC's strengths as an organization…we can be needlessly complex and bureaucratic," Mr. Wong wrote in the memo seen by Dow Jones Newswires. "This complexity reduces our effectiveness and efficiency. Our best estimate at this time is that approximately 3,000 existing roles [in Hong Kong] will be reduced over these three years."
He said that while there will be some redeployment of some people, "jobs will be eliminated."
It is unclear whether there will be a net decrease in HSBC's Asian head count after the 3,000 jobs are eliminated. The bank said this year it plans to hire at least 2,000 people in mainland China and Singapore over the next five years and 3,000 to 5,000 annually in Asia.
HSBC has a strong presence in Hong Kong, where it was founded in 1865, and is the city's biggest consumer bank by deposits. Analysts say the large cuts announced Wednesday could be seen as a blow for this Chinese territory because the bank has for decades been one of the city's biggest employers.
"This is a significant number of cuts and will definitely put pressure on the local labor market," Crédit Agricole CIB senior strategist Frances Cheung said. "The latest move could spur other firms to follow suit."
Hong Kong's unemployment rate fell to 3.4% in the May-July period from 3.5% in the April-June period, but economists said it could rise in the last quarter because of the uncertain global outlook.
Chester Yung is a reporter for Dow Jones. Jeffrey Ng is Hong Kong bureau chief for Dow Jones. This article originally appeared on The Wall Street Journal Online.