HSBC unveiled an almost seven-fold jump in reserves set aside for bad loans and a steep drop in profits in the second quarter due to coronavirus, as the bank warned of the impact of tension between the US and China.
Europe’s biggest lender said on Monday that provisions for potential loan losses surged to $3.8bn in the three months to June from $555m a year ago. That surpassed the $2.7bn in analyst estimates compiled by the company.
The group’s reported pre-tax profit for the quarter plunged 82 per cent to $1.1bn year on year, missing the $2.5bn estimated by analysts.
Expected loan losses for the year could be as much as $8bn to $13bn, HSBC said, “given the deterioration in consensus economic forecasts”. The bank also said it planned to “accelerate” job cuts announced earlier this year and may consider further measures to trim costs.
HSBC’s Hong Kong-listed shares fell as much as 3.9 per cent following the earnings announcement, to their lowest level since May 2009. The stock has dropped more than 40 per cent this year as the bank has faced a perfect storm of Covid-19, ultra-low interest rates and geopolitical tension.
While based in London, HSBC makes the vast majority of its earnings in Asia, particularly Hong Kong. The bank has been dragged into the deepening spat between Washington and Beijing.
The bank on Monday pointed to the risk of being caught between the two powers after Beijing introduced a controversial national security law in Hong Kong. Washington has responded to the legislation by threatening sanctions against Chinese and Hong Kong government officials.
Hong Kong’s national security law makes it illegal to co-operate with foreign sanctions regimes, a potential complication for the bank.
“Disagreements over trade, technology, human rights and the status of Hong Kong could result in people, sanctions, regulatory, reputational and market risks for the group,” the bank added in its earnings release.
Noel Quinn, chief executive, highlighted the increasing geopolitical risks facing the bank.
“HSBC has to operate in a difficult geopolitical environment. Current tensions between China and the US inevitably create challenging situations for an organisation with HSBC’s footprint,” he said.
Two consecutive quarters of vast loan-loss provisions and a deteriorating economic outlook are serious challenges for Mr Quinn, who was named chief executive earlier this year with a mandate to speed up a revamp of the bank.
HSBC said uncertainties due to the coronavirus pandemic could also “adversely affect” its dividend policy, which it will not re-evaluate until the end of the year.
Pressure from the Bank of England forced HSBC to cancel its dividend for the first time in 74 years. The move angered its large retail investor base in Asia and reignited a debate among executives over whether the lender should move its domicile to Hong Kong.
https://news.google.com/__i/rss/rd/articles/CBMiP2h0dHBzOi8vd3d3LmZ0LmNvbS9jb250ZW50LzhiM2ZjOTQ4LTkwNTYtNGM3ZS1hMjM2LTU2MmQ5NzJiNDBiYtIBP2h0dHBzOi8vYW1wLmZ0LmNvbS9jb250ZW50LzhiM2ZjOTQ4LTkwNTYtNGM3ZS1hMjM2LTU2MmQ5NzJiNDBiYg?oc=5
2020-08-03 05:37:30Z
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