HSBC Holdings posted profit that missed analysts’ expectations, abandoned a key target for returns and flagged ‘significant’ restructuring charges as it contends with a worsening global outlook, reported Bloomberg.
Europe’s largest lender, reporting results for the first quarter since the ouster of former chief John Flint, said adjusted pre-tax profit fell 12 per cent to $5.3 billion. HSBC also walked away from a target for return on tangible equity of more than 11 per cent in 2020, even as it credited operations in Asia with holding up despite challenges in the region.
It all adds up to a bigger-than-expected challenge for acting Chief Executive Officer Noel Quinn, who took over in August 2019. While Quinn stopped short of providing details about the planned restructuring, his comments indicate HSBC is getting ready to make steep cuts in underperforming businesses in Europe and the US.
Quinn, who’s signalled he wants the top job on a permanent basis, has been developing plans for a series of retrenchments. The bank may partially exit stock trading in some developed Western markets and will attempt to sell its French retail bank, a move that could remove as many as 8,000 staff from the payroll.
“Having a strong presence in both continental Europe and the US is important to our bank and we will retain a presence in both of those markets—but we need to reshape that presence,” said Quinn.
More than four months of street protests in Hong Kong have unnerved some customers while a confidence-sapping trade war with the US has dragged on China’s economic growth.
In Hong Kong—a key driver of HSBC’s earnings—adjusted pre-tax profit inched up one per cent in Q3 2019 to $3 billion. That may provide some relief for investors who have feared the unrest would eat into business there. However, the bank also flagged a credit charge of $90 million to reflect a deteriorating economic outlook in the city.
Comments from Hong Kong officials and economic indicators released in the past weeks paint a picture of a rapidly worsening situation in the Chinese territory. Few global companies have tied their fortunes as much to Hong Kong as HSBC, which wants to capitalise on closer economic ties with mainland China.