HSBC
HSBC REUTERS

Shareholders apparently applauded the news that global banking giant HSBC Holdings plc (NYSE: HBC) seeks to slash its global workforce by 10 percent over the next two years, as it needs to cut costs and exit unprofitable business lines.

As a result, up to 30,000 workers will eventually be laid off.

As of 12:51 p.m. (New York time), ADRs of the company were up by 0.88 percent.

HSBC’s decision to streamline its company follows similar moves by many other large banks, including Swiss banking icons UBS AG (NYSE: UBS) and Credit Suisse Group (NYSE: CS), which are also facing rising cost structures against falling revenue streams.

Banks around the world are likely to keep slashing jobs in order to compete better in what is a cutthroat global business.

“I think the layoffs in the banking sector reflect the brave new world that banks are facing in the wake of the financial crisis and the regulatory changes domestically and internationally that the crisis subsequently precipitated,” Dr. Sean M. Snaith, director of the Institute for Economic Competitiveness, College of Business Administration at University of Central Florida told IBTimes.

“I wouldn’t be surprised to see more of these types of layoffs as banks must focus on the cost side of the profit equation as the recovery and adjustment to new regulatory standards is constraining revenue growth,” he added.

Alan Gayle, chief investment strategist for RidgeWorth Investments, told IB Times: “Banks and share prices have adjusted to loan losses, soft loan demand and increased regulations. The layoffs are a sign that banks are taking proactive steps to restore long-term profitability.”

However, announcements of job cuts don’t necessarily meet with immediate approval from the stock market.

For example, on July 26, UBS said it would cut an undisclosed number of jobs in order to generate costs savings of up to $2.5 billion. In New York trading, shares of UBS actually fell by about 4 percent that day. Since then UBS stock has edged down a bit further.

On July 28, after Credit Suisse said it planned to cut 2,000 jobs, its shares in New York barely moved.

Longer-term however, job reductions (which actually means lower costs), usually benefit bank equity prices.

Snaith noted that “as revenues eventually begin to grow more robustly, the new lower cost structures will mean higher rates of profits and thus better performance of stock prices.”