LONDON • HSBC Holdings warned its bad debt charges could blow past a previous estimate to US$13 billion (S$17.9 billion) this year and said its profits tumbled 65 per cent, as the coronavirus pandemic hammered its retail and corporate customers worldwide.
The results from Europe's biggest bank by assets yesterday reinforced the trend of lenders worldwide inflating their buffers to absorb souring loans at a time when firms are reeling from the impact of Covid-19.
HSBC reported a pre-tax profit of US$4.32 billion for the first six months this year, lower than the US$5.67 billion average of analysts' forecasts.
The bank increased its estimate of the total bad debt charges it could take this year to between US$8 billion and US$13 billion from US$7 billion to US$11 billion, reflecting worse-than-expected actual losses in the second quarter and expectations of a steeper economic decline.
"What we have seen this quarter is quite a sharp shift in economic outlook for the global economy, the famous V has got a lot sharper and as a result we have materially increased our provisions," chief financial officer Ewen Stevenson told Reuters.
HSBC's business in Britain has been hit particularly hard, Mr Stevenson said, as it took a US$1.5 billion charge against expected credit losses.
While the bank's results were bolstered like those of its US and European peers by higher revenues from fixed income trading, analysts said investors were likely to be disappointed by the forecast of higher bad debt charges.
Its Hong Kong-listed shares dropped as much as 4.7 per cent yesterday afternoon, outpacing a fall in the local benchmark, to their lowest since March 2009.
Its revenues fell 9 per cent in the six-month period, as global interest rate cuts and declining market values on assets in investment banking and insurance outweighed higher trading income.
HSBC is continuing to review its long-term dividend policy, chief executive Noel Quinn said in a statement. The bank earlier this year halted payouts in response to a regulatory request in Britain, infuriating many of its retail investors, particularly those in Hong Kong.
Mr Quinn told Reuters the bank's staff headcount has fallen by some 4,000 this year after it restarted a redundancy programme that was put on ice following the coronavirus outbreak.
The bank is aiming to cut costs by 3 per cent this year from that restructuring as well as lower employee spending on travel and other items during the pandemic, he said.
Only a fifth of the around 9,000 staff in its headquarters in London's Canary Wharf district would be able to return to work in the near term for safety reasons, Mr Quinn told Reuters.