HSBC profits slashed amid coronavirus but thousands of job cuts put on ice

Banking giant HSBC has seen first-quarter profits almost halve and warned that a “severe” Covid-19 scenario could see loan provisions soar.
HSBC is the largest stock market listed bank in the UK with a vast global footprint. Picture: HSBC plcHSBC is the largest stock market listed bank in the UK with a vast global footprint. Picture: HSBC plc
HSBC is the largest stock market listed bank in the UK with a vast global footprint. Picture: HSBC plc

Britain’s biggest bank, which a vast global footprint, reported a 48 per cent slump in pre-tax profits to $3.2 billion (£2.6bn) for the first three months of 2020.

Profits were hit as it set aside $3bn for bad loans, up 417 per cent on a year earlier, as coronavirus and the oil price crash hammers the global economy.

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It warned investors that a “severe” Covid-19 scenario impact on the worldwide economy could see full-year loan provisions rise to between $7bn and $11bn.

HSBC added that while it is cutting costs, it is expecting “materially lower profitability in 2020”, with income likely to be knocked further if coronavirus continues to wreak havoc on the global economy over the year.

The alert came as it confirmed a previous announcement to put its mammoth redundancy programme on ice. It said it was putting the “wellbeing” of its staff first during the crisis and pausing plans to cut 35,000 jobs globally, including planned cuts among its 40,000-strong workforce in the UK.

Group chief executive Noel Quinn said: “The economic impact of the Covid-19 pandemic on our customers has been the main driver of the change in our financial performance since the turn of the year.

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“The resultant increase in expected credit losses in the first quarter contributed to a material fall in reported profit before tax compared with the same period last year.”

He added: “I take the wellbeing of our people extremely seriously. We have therefore paused the vast majority of redundancies related to the transformation we announced in February to reduce the uncertainty they are facing at this difficult time.”

HSBC’s vast Asian business was particularly badly impacted by coronavirus in the first three months of the year, with China – where the pandemic originated – the first to go into lockdown.

Richard Hunter, head of markets at Interactive Investor, said: “The writing was on the wall when the US banks reported first-quarter earnings two weeks ago and HSBC has fallen into the same unfortunate trap.

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“Sharply lower earnings due largely to the pandemic and markedly higher credit loss impairments are fast becoming par for the course given the global economic backdrop.

“If there are glimmers of hope at the moment, these tend to be in those areas where HSBC has some control of its own destiny. Operating expenditure has been reduced [and] the general financial strength of the bank has resulted in a slight improvement to its capital buffer.”

Nigel Frith, a senior market analyst at, noted: “With HSBC profits halving, it's almost for certain that this might be the start of a very long road towards recovery.

People are now beginning to realise how serious businesses have been hit and how much of a worse position everyone would be in if the government hadn't dropped that vital lifeline of colossal support for businesses.

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“What we are noticing is a pattern - these are not just the headline-grabbing firms like Virgin Atlantic, but more importantly, those small and medium-sized businesses which make up the bases to the British economy. The more stringent social distancing policies that the government is implementing would strangle the consumer-based UK economy.

“This is what is making it harder for banks. HSBC are seeing less activity, what they need is a global and coordinated package along these lines, where business owners and investors know the government will do whatever it takes, and that could start easing the global fear.”

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