Print this article

HSBC Says Profits Slide In H1

Tom Burroughes

3 August 2020

today said that its reported profit after tax for the first six months of 2020 fell by 69 per cent year-on-year to $3.1 billion. Profit attributable to ordinary shareholders slipped to $1.977 billion from $8.507 billion a year ago. 

Annualised expected credit losses and other credit impairment charges as a percentage of average gross loans and advances to clients surged to 1.33 per cent in H1 2020, up from 0.22 per cent a year ago, explaining much of the drop in the profit figure. Revenues also dropped over the year, slipping to $26.745 billion from $29.372 billion, HSBC said in a statement.

The bank has embarked on a widespread cost-cutting programme, announced before the COVID-19 pandemic. “We took further action on costs in response to the weaker revenue environment, reducing both performance-related pay and discretionary spending. Together with our ongoing cost-saving initiatives, this helped reduce reported operating expenses by 4 per cent,” it said. 

In the first quarter of this year, HSBC warned that it 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 are hitting 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.

In geographic terms, HSBC’s strongest result was in Asia, with a reported pre-tax profit of $7.369 billion, down from $9.78 billion a year ago. By contrast, Europe posted a loss of $3.06 billion, widening from a loss of $520 million a year earlier. The bank made a small loss in the Middle East and North Africa, with modest profits ($23 million and $12 million, respectively) for North America and the Middle East.

Both North and Latin America profits slipped from their levels a year before.

HSBC said that its Common Equity Tier 1 capital ratio was 15.0 per cent, rising by 30 basis points from the end of 2019.

Wealth, personal banking
The wealth, personal banking arm reported adjusted pre-tax profit of $1.695 billion in the half-year period, falling from $4.824 billion a year before and down from $3.989 billion at the end of December last year.

Net operating income in this segment stood at $11.251 billion in H1 2020, from $12.861 billion a year ago. The adjusted cost/income ratio of this segment was 65.3 per cent, against 58.7 per cent.