HSBC Restructures Further and Faster

HSBC will accelerate and expand restructure, despite beating analyst forecast with $3.1 billion of profit before tax in the third quarter. Profits were down $1.8 billion (37 percent) compared to the same period last year, according to the latest earnings release, supported by reducing risky credit and continued cost management. Year-to-date, the London-headquartered bank generated $9.9 billion in profit before tax.

These were promising results against a backdrop of the continuing impacts of COVID-19 on the global economy, said group chief executive Noel Quinn.

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.

Moving forward, the bank will focus on three main strategic priorities: growth acceleration in Asia continued digitalization, and further restructuring.

On the latter area, the bank is looking to speed up and expand the initiative after saving $600 million in costs this year and shedding 10,000 jobs since the third quarter last year. U.S. and Europe are also restructuring and are also on pace to meet their 2022 targets. We are accelerating the transformation of the Group, moving our focus from interest-rate sensitive business lines towards fee-generating businesses, and further reducing our operating costs, Quinn said. We also intend to increase our rate of investment in Asia, particularly in wealth, the Greater Bay Area, south Asia, trade finance, and sustainable finance.

According to Quinn, ECL charge for 2020 is trending lower towards the $8-13 billion range but he notes that current guidance makes the assumption that further significant economic deterioration is unlikely.

In addition, he also highlighted geopolitical risks including U.S.-China tensions as well as uncertainties linked to Brexit.

We expect lower global interest rates to continue to put pressure on net interest income, Quinn said. Based on current interest rates, we expect further modest net interest income headwinds in 4Q20, with some stabilization as we move into 2021.