HSBC profits fall 65% as pandemic continues to hit business

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The London-based lender said pre-tax profit for the first half of the year fell 65% to $ 4.3 billion from the same period last year, as revenues fell and that credit losses were worse than expected.

“Our first half performance was affected by the Covid-19 pandemic, falling interest rates, increased geopolitical risk and increased levels of market volatility,” CEO Noel Quinn said in a statement.

The bank added that the expected credit losses for 2020 could reach $ 13 billion this year, worse than previous estimates “given the deterioration in consensus economic forecasts.”

The company also disclosed an impairment of $ 1.2 billion due to “depreciation of software intangible assets, primarily in Europe.”

The drop in income didn’t help either. The bank’s revenues fell 9% in the first half of the year compared to the same period last year, further hurting profits.Before the pandemic, HSBC was already facing serious financial problems. It announced in February it would cut around 35,000 jobs and radically restructure its business after profits fell by a third in 2019.

Then the coronavirus crisis worsened. The bank put most of its restructuring plans on hold earlier this year, saying it hoped to reduce uncertainty for employees amid the pandemic.

Now, Quinn said, the bank will have to “accelerate” these plans, as well as review “the additional actions we need to take in light of the new economic environment to make HSBC a stronger and more sustainable company.”

The CEO also alluded to the deterioration of relations between China and the West, which has put HSBC in a difficult position.

Chinese state media, for example, accused HSBC of colluding with the United States in its legal fight against Huawei, the Chinese tech giant. The bank last week denied the allegations.

Quinn acknowledged on Monday the impact of geopolitical difficulties, saying in his statement that “the current tensions between China and the United States inevitably create difficult situations for an organization with the imprint of HSBC”.

“We will face any political challenges that arise with a focus on the long-term needs of our clients and the best interests of our investors,” he added, without giving further details.

Asia continued to be a positive point in the bank’s results.

The company achieved $ 7.4 billion in pre-tax profits in the first half of the year, “demonstrating the continued strength and resilience of our operations in the region and underscoring the importance of Asia to the group,” a- he declared.

HSBC shares in Hong Kong fell 4% in the wake of the earnings report. The bank’s shares in London and Hong Kong are both down more than 40% so far this year.

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