HSBC Holdings PLC yesterday said that first-quarter profit dropped nearly 30 percent owing to higher-than-expected credit losses and inflation, but the Asia-focused lending giant remained upbeat about its outlook.
The London-based bank announced pretax profit of US$4.2 billion for January to last month, down 28 percent year-on-year, but beating estimates, while reporting that revenue declined 4 percent to US$12.5 billion.
“While profits were down on last year’s first quarter due to market impacts on wealth revenue and a more normalized level of ECL [expected credit losses], higher lending across all businesses and regions, and good business growth in personal banking, insurance and trade finance bode well for future quarters,” HSBC Holdings chief executive officer Noel Quinn said in a statement.
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The lender reported ECL of US$600 million, compared with a release of US$400 million from the same period last year.
The bank said it continued to expect “mid single-digit percentage” growth this year for revenue and lending respectively.
Yesterday’s results came against the backdrop of Russia’s invasion of Ukraine, which the bank said was exacerbating inflationary pressures and contributing to higher ECL charges for the quarter.
“The repercussions from the Russia-Ukraine war, alongside the economic impacts that continue to result from COVID-19, have pushed up the prices of a broad range of commodities, with the resulting increase in inflation creating further challenges for monetary authorities and our customers,” the bank said.
Quinn said that the “vast majority” of HSBC Holdings’ business in Russia serves multinational corporate clients headquartered in other countries, and the bank was implementing sanctions put in place by the UK and other governments.
However, it forecast that its operation in Russia might become “untenable” if subject to further restrictions.
HSBC Holdings has embarked on a multiyear strategic pivot to Asia and the Middle East, and yesterday it said that while pandemic restrictions were lifting across much of the globe, key markets such as China and Hong Kong remained committed to strict controls.
“China’s government-imposed lockdown restrictions in major Chinese cities have impacted China’s economy, Asia tourism and global supply chains adversely,” it said.
China has high case counts in multiple cities and has locked down its finance hub, Shanghai, for the past month.
Meanwhile, Hong Kong — HSBC Holdings’ largest market — has entered its third year of strict pandemic controls that have isolated it from the rest of the world and hit businesses hard.
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