Results for the wealth and personal banking division - which includes private banking - fell in the nine months to end-September, and also for the latest quarter from a year earlier. Group results were also down. The bank is accelerating a cost-cutting programme.
The wealth and personal banking arm of HSBC, the recently reconfigured division that includes private banking, logged a sharp fall in adjusted pre-tax profit for the nine months to 30 September, at $3.121 billion, from $6.798 billion a year ago.
For the three months to end-September, wealth and personal banking adjusted pre-tax profit did not drop as severely, however – down to $1.426 billion, falling from $1.973 billion, HSBC said in a statement today.
Across the entire banking group, adjusted pre-tax profit for the nine-month period was $9.939 billion, falling from $17.693 billion. The main cause of the decline was lower revenue. The banking group said its third-quarter figures included its share of an impairment of goodwill by its associate, The Saudi British Bank, of $500 million. On an adjusted basis, pre-tax profit in Q3 fell by 21 per cent year-on-year to $4.3 billion.
Reported revenue for the whole of HSBC fell by 11 per cent to $11.9 billion, reflecting the effect of interest rate cuts on its deposit franchises across all businesses, partly offset by the positive effects of market behaviour.
Group chief executive Noel Quinn said the results had to be put into the context of the global pandemic and the impact on markets and client behaviour.
“These were promising results against a backdrop of the continuing impacts of COVID-19 on the global economy. I'm pleased with the significantly lower credit losses in the quarter, and we are moving at pace to adapt our business model to a protracted low interest rate environment,” Quinn said.
HSBC’s Common Equity Tier 1 Capital ratio, a standard international measure of a bank’s capital buffer, rose from the end of June to 15.6 per cent.
Looking forward, HSBC said it expects lower global interest rates to continue affecting net interet income. It expects to cut the group’s 2022 annual cost base beyond its original $31 billion target, by exceeding its $4.5 billion gross savings target, and it expects to incur more than $6.0 billion “cost to achieve” spending to generate those savings. HSBC also said that, given 2020 results and forecasts for 2021, it may consider paying a “conservative” dividend for 2020.
“Geopolitical risk, particularly relating to trade and other tensions between the US and China, remains heightened. There also remains uncertainty regarding the UK's withdrawal from the European Union. Trade talks between the UK and the EU are ongoing and there remains a possibility that there may not be a trade deal agreed by the end of 2020,” the bank said, flagging two of the main uncertainties for banks and other organisations.
The bank also referred to worries about mainland China’s enforcement of a new national security law on Hong Kong, an issue that is sensitive to HSBC, given its historic ties to Hong Kong. (The bank has drawn fire for its public endorsement of Beijing’s actions.)
“The financial impact to the Group of geopolitical risks in Asia is heightened due to the strategic importance of the region, and Hong Kong in particular, in terms of profitability and prospects for growth. We continue to monitor the situation,” HSBC added.