HSBC and RBS set aside millions for Brexit costs

Pedro Gonçalves
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HSBC and RBS set aside millions for Brexit costs

HSBC has set aside £128m as a contingency plan for Brexit, making it the latest banking giant to make provisions in anticipation of bad loans spiking in the UK after the country leaves the EU.

The move comes shortly after stated-backed Royal Bank of Scotland (RBS) made a £100m provision in October to account for bad debts rising due to Brexit. 

The £128m provision comes despite only 10% of HSBC's revenue being generated in the UK, and the bank already having a well-established operation, HSBC France, within the EU.

I don't think I'm alone in saying that the political uncertainty has gone on far too long. Our corporate clients are pausing before making financial decisions, and this of course is damaging the UK economy and will affect our income performance"

Speaking in a results presentation to analysts, HSBC chief executive John Flint said: "The outlook for 2019 has softened. Uncertainty and risk in the global economy is higher, relating mainly to the UK economy, global trade tensions, and the future path of interest rates. This is yet to translate into higher credit losses, but that could change if the global economy deteriorates further."

The bank posted a 5% rise in revenue to £41.7bn and a 16% rise in profits to £15.4bn for the 2018 calendar year, but both figures were worse than analysts had expected.

Royal Bank of Scotland highlighted its concern over Brexit when it reported its results on Friday. Ross McEwan, the bank's chief executive, expressed frustration over the continuing political impasse, declaring that the uncertainty has already led to UK economic growth "cooling off". 

McEwan said: "I don't think I'm alone in saying that the political uncertainty has gone on far too long. Our corporate clients are pausing before making financial decisions, and this of course is damaging the UK economy and will affect our income performance."

As some banks are making provisions for Brexit, others have racked up quite a bill as they shift operations out of the UK.

Bank of America has spent around $400m on preparing for Brexit, which has seen the bank move some operations from London to Dublin and Paris.  Barclays has spent $100m to $200m moving operations and staff out of Britain to prepare for Brexit, its UK chairman Gerry Grimstone said.