HSBC Predicts Further Cost Cuts Despite Better Than Forecast Results | Company


HSBC expects further cost cuts, despite a sharp drop in provisions to cover bad debts related to the Covid crisis and better than expected profits in the third quarter.The lender has also signaled that it may start charging bank accounts in markets such as the UK, where the service is currently free.

HSBC’s pre-tax profits fell to $ 3.1 billion (£ 2.4 billion) in the three months ending September, down 36% from $ 4.8 billion during from the same period last year. However, that easily exceeds analysts’ forecast of $ 2.1 billion.

The performance of Europe’s largest bank was helped by lower-than-expected provisions to cover a potential increase in defaults linked to the economic fallout from the pandemic. HSBC set aside $ 785 million in the third quarter, less than half of the $ 2 billion forecast by analysts.

It brings the bank’s total depreciation charge to $ 7.6 billion for the year to date, after setting aside $ 3 billion and $ 3.8 billion in the first and second quarters, respectively.

HSBC said it expected loan loss charges for all of 2020 to be in the lower end of the $ 8 billion to $ 13 billion range described earlier this year.

“These latest forecasts, which continue to be subject to a high degree of uncertainty due to Covid-19 and geopolitical tensions, assume that the likelihood of a further significant deterioration in the current economic outlook is low,” HSBC said .

However, HSBC has again signaled that it will cut costs further than originally planned. “In view of the significant changes in the operating environment, we intend to accelerate the transformation of the group. We plan to reduce the group’s 2022 annual cost base beyond our initial target of $ 31 billion, while supporting investments in our focus areas.

It comes just months after the bank announced it would step up cost cutting that is estimated to cause 35,000 job losses across its global operations.

Meanwhile, its chief financial officer, Ewen Stevenson, has warned the bank may start charging for certain services, including checking accounts in countries like the UK, where basic accounts are generally free.

“We will have to consider charging for basic banking services in some markets because a lot of our customers in this environment will be losing money,” Stevenson told Reuters.


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