HSBC profits plunge 65% as it accelerates 35,000 job cuts

Edmund Heaphy
·Finance and news reporter
·3 mins read
HSBC
HSBC, Europe’s largest bank by assets, generates around half of its revenue in Asia. Photo: Joana Toro/Viewpress via Getty Images

The coronavirus crisis and worsening tensions between the US and China dealt a double blow to HSBC (HSBA.L) during the first half of its financial year, with pre-tax profits plunging 65% to $4.3bn (£3.3bn).

The figure for the six months to 30 June came in well below the forecasts of analysts, who had predicted that the UK’s largest lender would pull in $5.67bn during the period.

The Asia-focused bank said on Monday that its financial performance was impacted by the coronavirus pandemic, market volatility, low interest rates, and “increased geopolitical risk.”

While HSBC is Europe’s largest bank by assets, the London-listed bank generates around half of its revenue in Asia.

“The first six months of 2020 have been some of the most challenging in living memory. Due to the COVID-19 pandemic, much of the global economy slowed significantly and some sectors drew to a near total halt,” said chief executive Noel Quinn on Monday.

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The bank said that revenue during the six months fell 9% to $26.7bn. It also said that it may be forced to set aside up to $13bn on bad loan provisions, noting that it expected significantly more people and businesses to default on their loans.

The bank said it has given more than 700,000 payment holidays on loans, credit cards, and mortgages, amounting to over $27bn in customer relief.

Current tensions between the US and China “inevitably create challenging situations” for the bank, Quinn said.

The bank, which is one of the main conduits between Western capital markets and China, has faced staunch criticism for its public backing of Hong Kong’s new national security law, which criminalises criticism of the Chinese Communist party.

“We will face any political challenges that arise with a focus on the long-term needs of our customers and the best interests of our investors,” said Quinn.

The bank said that it expected low interest rates across the world — ushered in by central banks hoping to cushion economies from the economic effects of the pandemic — to put “increasing pressure” on its revenue.

HSBC is expected to accelerate its turnaround plans in the wake of the pandemic. The bank announced a sweeping restructuring programme and said it would axe 35,000 jobs in February.

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In the first tranche of job losses, more than 4,000 people departed the company during the first six months of the year, the bank said.

The bank is also expected to double down on its pivot towards China, whose financial markets have been increasingly opened to foreign capital.

Referring to the increasing tensions between the US and China, HSBC noted that there was a need for a bank “capable of bridging the economies of east and west.”

“We will face any political challenges that arise with a focus on the long-term needs of our customers and the best interests of our investors,” said Quinn.

The bank said that while its financial performance will continue to be affected by the coronavirus pandemic, geopolitical uncertainty “could also weigh heavily” on its clients.

Quinn cited tensions between China and both the US and UK, as well as the UK’s post-Brexit trading relationship with the European Union.