HSBC Profit Slumps on Coronavirus, Trade Tensions -- Update
August 03 2020 - 2:17AM
Dow Jones News
By Simon Clark
LONDON-- HSBC Holdings PLC's net profit fell in the second
quarter as the impact of the coronavirus pandemic complicated the
bank's efforts to refocus on Asia while dealing with rising
U.S.-China political tensions.
Profit for the global bank with Asian roots fell 96% to $192
million in the three months ended June. The London-based lender set
aside $3.83 billion in provisions for losses from loans during the
quarter, almost seven times more than in the same period last year.
HSBC set aside $3 billion of provisions in the first quarter.
"Due to the Covid-19 pandemic, much of the global economy slowed
significantly," HSBC Chief Executive Noel Quinn said in a
statement. "Current tensions between China and the U.S. inevitably
create challenging situations for an organization with HSBC's
footprint. However, the need for a bank capable of bridging the
economies of east and west is acute."
Mr. Quinn said he would accelerate plans announced in February
to streamline the bank's operations by shedding 15% of its
235,000-strong workforce and cutting business lines and customer
relationships across the U.S. and Europe to refocus on its more
profitable Asian heartland. HSBC was founded in Hong Kong and
Shanghai in the 1860s and makes most of its profit in Hong Kong and
mainland China.
The bank joined other British lenders earlier this year in
canceling dividend payouts at the request of the Bank of England, a
move aimed at shoring up their capital buffers against economic
shocks stemming from the pandemic. This hit the bank's mom-and-pop
investor base in Hong Kong hard, and its shares have fallen 42%
this year.
The bank's rebalancing toward China has become more complicated
because of rising political tensions. In June, U.S. and British
politicians strongly criticized HSBC after its Asia chief publicly
signed a petition backing a security law Beijing was imposing on
Hong Kong. U.S. Secretary of State Mike Pompeo called HSBC's
support for the law a "show of fealty" that "seems to have earned
HSBC little respect in Beijing."
After supporting the law, HSBC drew strong criticism in the
world's most populous nation for its involvement in a U.S. legal
case against China's Huawei Technologies Co.
Chinese newspaper People's Daily wrote on July 24 that HSBC set
"traps" for Huawei to break U.S. sanctions against doing business
in Iran. HSBC said the U.S. Department of Justice made formal
requests for information about Huawei, a former HSBC client. HSBC
said it wasn't involved in the DOJ's decision to investigate Huawei
or to arrest Huawei finance chief Meng Wanzhou. Ms. Meng and Huawei
deny any wrongdoing.
"HSBC does not have any hostility towards Huawei and did not
'frame' Huawei," the bank said in a July 25 statement.
As HSBC strains to maintain good relations with both Washington
and Beijing, executives have become increasingly exasperated by the
rising political tensions. Sherard Cowper-Coles, HSBC's head of
public affairs and a former British ambassador to Afghanistan, in
June described the tension between the U.S. and China as "an
ideological war reminiscent on the American side of the depths of
McCarthyism."
HSBC's U.K. unit reported a pretax loss of $857 million in the
second quarter, compared with a $157 million profit in the same
period last year. HSBC is the latest bank to report weak results at
its operations in the U.K., which has recorded more deaths from
coronavirus than any other European country.
Write to Simon Clark at simon.clark@wsj.com
(END) Dow Jones Newswires
August 03, 2020 02:02 ET (06:02 GMT)
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