Profits Rise At HSBC's Private Bank; Group Restructuring Delayed

Tom Burroughes Group Editor 29 April 2020

Profits Rise At HSBC's Private Bank; Group Restructuring Delayed

The banking group said its overall restructuring of its businesses, including moves to cut risk-weighted assets and costs, will be delayed because of the pandemic.

HSBC’s global private banking arm logged adjusted profit of $121 million, against $98 million a year ago, while the retail banking and wealth arm fell to $611 million from $1.992 billion. 

Adjusted revenue increased by $60 million, HSBC said of its private bank, mainly from growth in investment and lending revenue in Asia and in Europe, driven by high volatility in equity markets. This increase was partly offset because of a charge relating to a single client. Adjusted operating expenses were $10m lower as we invested in the business in Asia, while reducing costs in Switzerland.

The bank warned that it has had to temporarily delay some of its restructuring plans, including its push to slash risk-weighted assets and costs, as a result of the COVID-19 pandemic’s hit to financial markets and the wider global economy. 

Earlier this year the UK/Hong Kong-listed bank planned to reduce the total number of jobs to approximately 200,000 down from 235,000. The restructuring changes will hit parts of HSBC’s European and US investment banking operations. It has also folded retail banking, wealth management, and global private banking into a new wealth and personal banking arm.

“We also expect mid-to-high single digit percentage growth in RWAs [risk-weighted assets] in 2020, including as a result of the effects of negative credit rating migration movements, impacting our CET1 [common equity tier 1] ratio,” Noel Quinn, HSBC group CEO, said.  

On a reported basis, pre-tax profit in the first quarter of this year slumped by 48 per cent year-on-year to $3.2 billion from higher expected credit losses and other credit impairment charges and lower revenue.

The reduction primarily reflected the global impact of the pandemic and weakening oil prices, HSBC said. Reported revenue fell by 5 per cent due to adverse market impacts in life insurance manufacturing and adverse valuation adjustments in global banking and markets, offsetting a resilient revenue performance, notably in Asia, global markets, retail banking and global private banking.

"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. The resultant increase in expected credit losses in the first quarter contributed to a material fall in reported profit before tax compared with the same period last year,” Noel Quinn, group chief executive, said.

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