HSBC this morning reported a fall of 48% in its 1Q worldwide profits, with the bank posting pre-tax profits of $3.2bn, and warning of "potentially signficant" credit losses due to the fallout from the covid-19 lockdowns. At the same time, private banking profits surged by 23% YoY.
The London-based bank, Europe's biggest bank by assets, set aside $3bn to cover potential loan losses in 1Q2020, a 400% increase from the $585m in provisions ring-fenced in 1Q2019.
However, compared to its North American rivals, the bank's figures suggest it is in a strong position to weather the storm. Last week Wells Fargo, the New York-based giant, saw its 1Q profits tumble by almost 90%. Another US bank, JP Morgan, reported 70% 1Q losses compared to last year.
HSBC has always been there for our customers in times of crisis, and we are working hard to support them during this unprecedented period of disruption. We do so from a position of strength, with robust levels of capital, funding and liquidity."
At the same time, shareholders will be concerned that HSBC's return on tangible equity, an important measure of profitability for banks, fell to 4.2% from 10.6% in the same period last year. This is lower than many of its rivals.
HSBC Private Bank, recently merged with its retail banking division, told a different tale. The global private banking arm saw pre-tax profits rise for the 1Q by 23% YoY, to $100m. The bank said it attracted $5.3bn from HNW clients across Asia and Europe in 1Q, increasing private banking revenue by $60bn.
Noel Quinn, HSBC Holdings' CEO, said this morning: "HSBC has always been there for our customers in times of crisis, and we are working hard to support them during this unprecedented period of disruption. We do so from a position of strength, with robust levels of capital, funding and liquidity.
The Asian-focused lender warned this morning that, "Should the covid-19 outbreak continue to cause disruption to economic activity globally through 2020, there could be further adverse impacts on our income," HSBC said in a statement posted on its global website. The bank is particularly exposed to Asia, and particularly Hong Kong, where it makes more than 90% of its profits.
The market-specific support measures that we are offering our personal and business customers have had strong take-up, and we remain responsive to their changing needs. We are also working closely with governments around the world to channel fiscal support to the real economy quickly and efficiently."
As reported yesterday by II, HSBC is determined to push ahead with its planned restructuring despite the obvious challenges posed by the covid-19 pandemic, cutting jobs and costs, reducing its exposure to underperforming markets and simplifying its complex management structures.