HSBC profits fall in challenging trade


HSBC is underperforming in parts of Europe and the United States, as third-quarter profits fell, the lender’s interim chief executive said on Monday, warning also of headwinds including Brexit. The Asia-focused banking giant has been trying to lower costs as it faces the double uncertainties caused by the grinding US-China trade war and Britain’s impending departure from the European Union.

Noel Quinn, who took over as acting CEO after the shock ouster in August of John Flint, has overseen plans to axe some 4,700 jobs, primarily outside of its more profitable businesses within the Greater China region. “Parts of our business, especially Asia, held up well in a challenging environment in the third quarter,” Quinn said in a statement attached to the bank’s latest results.

“However, in some parts, performance was not acceptable, principally business activities within continental Europe, the non-ringfenced bank in the UK, and the US.” The results statement gave no concrete details of what further restructuring may be down the line but said investors would be updated before next February, when the full 2019 results are released.

– More job cuts loom –

But Quinn, who has signalled he wants the top job on a permanent basis, hinted at more pain ahead in the coming months at the bank, which employs 240,000 people worldwide across 65 countries and territories. “We will look to simplify the organisation, reduce complexity, improve the pace of execution — and that in itself could reduce our headcount and cost base,”

Quinn told reporters on a conference call. “We are not quantifying at this point in time what that headcount or cost impact might be,” he added, amid media speculation that the lender is mulling another 10,000 job cuts.
The bank earlier this month confirmed that it was undertaking a strategic review of its retail operations in France while it may also partially exit stock trading in some developed Western markets.

“Our previous plans are no longer sufficient to improve performance for these businesses, given the softer outlook for revenue growth,” Quinn said in the statement. “We are therefore accelerating plans to remodel them, and move capital into higher growth and return opportunities.”

– Forecasts missed –

In the results, pre-tax profit slipped 18 percent year-on-year to $4.8 billion in July-September with the vast majority — $4.7 billion — coming from Asia, according to the statement. Adjusted pretax profit fell 12 percent to $5.3 billion, net profit fell 24 per cent to $3 billion and revenue slipped 3.2 percent to $13.4 billion, all missing analyst forecasts.

The bank said its performance in Hong Kong — which has been battered by nearly five months of relentless political unrest — remained “resilient”. HSBC is uniquely tethered to Hong Kong’s fortunes, pitching itself as a gateway to mainland China but leaving much of its core business potentially vulnerable to the city’s political chaos.

A bright spot for investors was pretax profit in Hong Kong creeping up one percent in the third quarter to $3 billion. But the bank also flagged a charge of $90 million to reflect a deteriorating economic outlook in the city. On Sunday, Hong Kong’s Financial Secretary warned the city was likely to end the year in recession because of the ongoing pro-democracy protests.

Overall HSBC warned the second half of the year looked set to be less rosy that the first half, when the bank reported net profit rose 18.6 percent to $8.5 billion. Around midday in London, HSBC shares had lost four percent to 592.70 pence, making them the top faller on the FTSE 100 index.

Source: AFP