HSBC Holdings PLC yesterday said that first-quarter pretax profits almost halved as the banking giant was battered by the COVID-19 pandemic while it embarked on a major restructuring.
The lender reported pretax profits of US$3.2 billion, down 48 percent from the same period last year, citing credit losses from clients struck by the economic slowdown as a major cause.
“The economic impact of the COVID-19 pandemic on our customers has been the main driver of the change in our financial performance since the turn of the year,” newly confirmed HSBC chief executive officer Noel Quinn said in a statement.
Photo: AFP
Reported expected credit losses in the first quarter were US$3 billion — US$2.4 billion more than the first quarter of last year and the bank’s biggest bad-loan bundle in almost nine years.
The Asia-focused lender has embarked on a huge cost-cutting initiative as it battles multiple uncertainties caused by the US-China trade dispute, Britain’s departure from the EU and the pandemic.
Earlier this year it announced plans to slash 35,000 jobs, trimming fat from less profitable divisions, primarily in the US and Europe.
Yet COVID-19 has thrown a spanner into the works with HSBC yesterday confirming many of the redundancies would be put on hold for now “to reduce the uncertainty” many of its employees would face in a decimated jobs sector.
In the past few years HSBC’s Asia business has done well — fueled primarily by China — but Europe and the US have disappointed.
Before the coronavirus went global the bank announced plans to make US$4.5 billion in cost cuts by 2022, with restructuring costs of about US$6 billion.
Many of the cutbacks would be in the European and US investment banking sectors, while units in more profitable Asia and the Middle East would be bolstered.
HSBC warned defaults would increase the longer the pandemic goes on, with the bank expecting between US$7 billion and US$11 billion in credit losses from clients this year.
The biggest risks are coming from the “oil and gas, transport and discretionary consumer sectors,” the bank said.
However, Quinn added that it was facing down the global pandemic “from a position of strength” with “robust levels of capital, funding and liquidity.”
Last month, HSBC was one of a number of banks to cancel dividends and buybacks at the request of British regulators.
The move is part of an effort to bolster cash reserves for the economic crisis, but it caused anger among investors in Asia where about 90 percent of HSBC’s profits are made.
HSBC said that it plans to review the scrapped dividends policy toward the end of this year.
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