HSBC Holdings PLC’s interim chief executive officer Noel Quinn yesterday said that the banking giant was underperforming in parts of Europe and the US, as third-quarter profits slipped and the lender warned of further headwinds.
The Asia-focused behemoth has been trying to lower costs as it faces the double uncertainties caused by the grinding US-China trade dispute and Britain’s impending departure from the EU.
Quinn, who took over after the shock ouster in August of John Flint, has overseen plans to cut about 4,000 jobs, primarily away from its more profitable businesses within the greater China region.
“Parts of our business, especially Asia, held up well in a challenging environment in the third quarter,” Quinn said in a statement attached to the bank’s latest results.
“However, in some parts, performance was not acceptable, principally business activities within continental Europe, the non-ringfenced bank in the UK, and the US,” he added.
The results statement gave no concrete details of what further restructuring might be down the line and said that investors would be updated before February, when the full-year results for this year are released.
Yet Quinn, who has signaled he wants the top job on a permanent basis, hinted at more pain ahead in the coming months.
“Our previous plans are no longer sufficient to improve performance for these businesses, given the softer outlook for revenue growth,” he said. “We are therefore accelerating plans to remodel them, and move capital into higher growth and return opportunities.”
Bloomberg News has reported that the bank might look to partially exit stock trading in some developed Western markets, and would attempt to sell its French retail bank.
Pre-tax profit slipped 18 percent year-on-year to US$4.8 billion in the July-to-September period, with the vast majority — US$4.7 billion — coming from Asia, the statement said.
Adjusted pretax profit fell 12 percent to US$5.3 billion, net profit fell by 24 percent to US$3 billion and revenue slipped 3.2 percent to US$13.4 billion, all missing analyst forecasts.
The bank said that its performance in Hong Kong — which has been battered by nearly five months of grinding political unrest — remained “resilient.”
A bright spot for investors was pretax profit in Hong Kong creeping up 1 percent in the third quarter to US$3 billion, but the bank also flagged a charge of US$90 million to reflect a deteriorating economic outlook in the city.
Overall HSBC warned the second half of the year looked set to be less rosy that the first half, when the bank reported net profit was up 18.6 percent at US$8.5 billion from a year earlier.
“The revenue environment is more challenging than in the first half of 2019, and the outlook for revenue growth is softer than we anticipated at the half-year,” the London-based firm said.
It also said that it was unlikely to hit a key profit target.
The bank had been hoping to deliver a more than 11 percent return on tangible equity (RoTE) by next year, a target it said it now “no longer expected to reach.”
RoTE came in at 6.4 percent compared with 10.9 percent for same period a year earlier.
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