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Numbers, Part Three: HSBC

Same bank channel and almost the same bank time …

Continuing our numbers story we move to a large galaxy known as Canary Wharf on the outer limits of the London Universe, and focus upon a large, 45 floor, gleaming office block … yes, it's HSBC's Global Head Office.

This is the office they threatened to move out of London and overseas in October 2006 in order to get the UK Chancellor of the Exchequer, Gordon Brown, to lower taxes.  Maybe that's why in March 2007 Mr. Brown did just that, and reduced Corporation Tax by 2%.  Just shows how influential HSBC can be.

Now we all know that HSBC is one of the world's biggest banks, so here's a few numbers:

  • HSBC has over 125 million customers around the world;
  • 25 million customers are online with HSBC's internet banking;
  • They have more than 312,000 staff in 82 countries;
  • they are regulated by 490 central banks and regulatory authorities and spend over $500 million a year on compliance;

… but these are not the numbers that fascinate me.  Nope.

I was recently treated to a presentation from a senior IT guy from HSBC who had one slide that rocked my socks.

Here goes. 

First, he had a list of HSBC's IT Costs as follows:

            % of Revenue   % of Operational Expense (OpEx)            

2003     8.63%                    15.72% 

2004     8.03%                    16.18%

2005     7.85%                    15.96%

In case you're wondering, Operating Expenses for 2005 were $29,514 million which is why HSBC spend over $4 billion a year on techie stuff.  This compares with Citi  who spend about 19% of OpEx on IT and Morgan Stanley's spend of 21%. 

These are big numbers folks.

$4 billion.

So, where's all that money going?

Well, staff are a major part of the cost and, as mentioned, HSBC have 312,000 staff.  Strip out the tellers, the branch managers, the credit risk, administration, back office and others, and you find that of those 312,000 people, 23,000 are techies.  Just over 7.3%. 

To put that in perspective, take these numbers from Computerworld’s Best Places to Work in 2006.  These are the total number of people working for some of the largest consultancies, including all of their admin, sales and marketing in the USA:

Ernst & Young                        24,353

KPMG                                   20,212

Booz Allen Hamilton                 17,303

So HSBC's information technology division is near enough the same size as the American operations of Ernst & Young, and is bigger than KPMG or Booz Allen Hamilton.

Next number: how many developers?

Of HSBC's 23,000 techies, 13,000 are developers. 

That's about the same size as the total number of people working for State Street (12,994 staff) in the USA, and equates to about ten Temenoses (1,300 staff worldwide). 

Temenoses?  Sounds like someone who either sniffs a lot or has a disease of the rhino.

So what do these ten Temenoses produce?

Applications

10,000 of them, according to this guys PowerPoint.

In other words, HSBC is one Huge Software Building Corporation, with 23,000 IT staff and 13,000 developers producing and supporting 10,000 applications. 

By way of comparison, Microsoft had 2,000 developers producing one application: Vista.  HSBC could have produced six and a half Windows Vista's.

So why do you need so many people? 

I guess because those 10,000 applications process 100 million transactions daily and move around $1 trillion of funds every day.

That's an awful lot of transactions and an awful lot of money.

Equally, those 10,000 applications have helped to cut HSBC's transaction costs down from 25 cents per transaction to just under 6 cents over the ten years between 1995 and 2005.

The thing is though, if it takes 23,000 IT staff ten years to reduce transaction costs to 6 cents per transaction … how many will it take for the next ten years?  And what happens if the transaction costs reduce to … 0.6 cents per transaction?  Or 0.06 cents?  Or 0.006 … I guess there's only so much you can save before you need to start saving headcount.

Whooops.   No wonder Citi, ABN AMRO, Barclays and all those other folks are getting concerned about job cuts.

After all, the more you develop, the more you save costs, the less staff needed surely?

Meantime, in the numbers game, there's plenty more and tomorrow we'll take a look at SWIFT and FIX. You've probably got the idea by now … same bank channel, same bank time. 

 

About Chris M Skinner

Chris M Skinner
Chris Skinner is best known as an independent commentator on the financial markets through his blog, the Finanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal’s Financial News. To learn more click here...

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