The bank is close to already achieving the bottom end of a $2.5-$3.5 billion range of annualized savings by next year, as set out by CEO Stuart Gulliver, who is steering HSBC back to its roots as a financier of global trade.

HSBC (0005.HK) has sold 28 businesses, taking some 15,000 staff off its payroll, and releasing about $55 billion in risk-weighted assets, the bank said in a statement in Hong Kong on Thursday. Having focused on shrinking the bank, analysts and investors expect Gulliver may soon point to where HSBC is expanding.

"We will continue to simplify HSBC, enabling us to integrate systems and operate to high global standards internationally," Gulliver said in the statement. "We will continue to run off our legacy assets, including the U.S. consumer and mortgage lending book."

Separately, HSBC Chairman Douglas Flint said the board was "very satisfied" with progress made on the strategy, but added that return on equity (RoE) and cost efficiency metrics lag the stated targets a year after it was launched.

Gulliver, a 32-year HSBC veteran who took over the top job from Michael Geoghegan, set out to get RoE - a key measure of profitability - above 12 percent, and make sustainable cost savings of up to $3.5 billion, bringing costs below 52 percent of group annual revenue.

The bank was behind those targets at the end of March, with RoE at 6.4 percent and costs at 64 percent of revenue.

"I think HSBC should come out and be honest about it," said Jim Antos, an analyst at Mizuho Securities in Hong Kong. "In reality, there was a force majeure in Europe blowing up, and they will need more than 3 years to meet their targets."

HSBC also said the integration of its four businesses - retail banking and wealth management, commercial banking, global banking and markets, and private banking - would deliver incremental revenue of $1.5 billion in the short to medium term. Last year, it brought in an additional $500 million, the bank said.

HSBC embarked on almost 30 deals in the last year to move out of businesses that lack scale, don't make money or don't connect with other areas. There have been big U.S. sales, and smaller moves in Europe, including closures in Poland, Georgia and Slovakia.

HSBC last year sold its U.S. credit card arm to Capital One Financial Corp (COF.N) for $2.6 billion more than the face value of the loans, and in Latin America, it has sold or plans to sell businesses in a string of countries, leaving it to focus on Argentina, Brazil and Mexico.

Asia has not been immune, with divestments in Thailand and Japan so far. It is in talks to sell its retail and wealth management business in South Korea.

SWISS RULES

RoE, which topped 15 percent each year from 2004-07 before plunging to 4-5 percent in the financial market crisis, will come back under pressure as Basel III regulations come in.

All banks face the same pressure to divert cash to their reserves, and that could cut up to 2 percentage points from HSBC's RoE which reached 11 percent last year and held at that level in the first quarter of this year.

Although there are fears Asian growth is slowing, HSBC is expected to pick up business there as European rivals retrench, under pressure to shrink and focus lending at home. HSBC's share of Asia trade finance jumped to 14 percent in the first quarter from 3 percent in 2010, Morgan Stanley analysts estimated.

Costs in Europe jumped above 70 percent of underlying revenue.

HSBC's problems in the United States date back to its disastrous 2003 purchase of Household Finance, a unit crushed by the subprime mortgage debacle and subsequent 2008 financial crisis. Gulliver has accelerated change in the United States, selling half of HSBC's branches and the credit card business.

London-listed HSBC shares closed down 2.5 percent on Wednesday at a 15-week low. The stock is up a little over 9 percent so far this year, outperforming the benchmark FTSE 100 .FTSE, which is down more than 3 percent.

The bank's Hong Kong-listed shares had their biggest one-day fall this year on Wednesday, losing 3.4 percent, and on Thursday were down 0.6 percent in a broader market .HSI that was up 0.9 percent. The stock has declined around 12 percent so far in 2012.

(Additional reporting by Michael Flaherty; Editing by Ian Geoghegan)

• A Permanent Economic Emergency