HSBC fails to meet profit forecast in Europe and the US
A recent financial report from one of Europe’s largest banks has shown poor results in Western markets amid continuing political turmoil, including Britain’s uncertainty in leaving the EU and the ongoing trade war with the US.
Noel Quinn, who replaced John Flint as acting CEO of the HSBC bank back in August, released a statement along with the financial results on Monday, with information that as many as 4,000 jobs were going to be retrenched as part of a restructuring plan, aimed primarily at its businesses in Asia. The report did not give any solid restructuring details, noting that the company plans to wait until the year’s final report comes in, at which point the bank will inform its investors the outline, sometime in early 2020.
"Parts of our business, especially Asia, held up well in a challenging environment in the third quarter, however, in some parts, performance was not acceptable, principally business activities within continental Europe, the non-ringfenced bank in the UK, and the US," said Quinn in a letter that was attached to the bank’s financial results.
The banking giant may also seek a partial exit from the US and European stock markets, as reported by Bloomberg News, with additional plans to sell the HSBC retail bank in France.
The financial report itself showed the HSBC’s pretax profits dropping by 18% on-year in the July-September period, with $4.7 billion of the $4.8 billion profit being from Asia. Worse yet, the bank’s net profit dropped by 24% to $3 billion, while revenue fell 3.2% to $13.4 billion. All reported figures were below analysts’ predictions.
The continuing pro-democracy protests in Hong Kong are just now starting to make their mark on the overall economy, even though they have been going on for 5 months to date. The end of the year is likely to end in recession for Hong Kong, according to a statement made by its Finance Secretary on Sunday.
Despite ongoing protests in Hong Kong, the bank said its performance in Hong Kong maintained a ‘resilient’ position, showing a 1% increase in pretax profit in the third quarter, to a total of $3 billion.
The second half of 2019, however, is unlikely to be as good for the bank as the first. Although the company reported an 18.6% increase in net profit from the year prior ($8.5 billion), the company now predicts the numbers these numbers to drop. Return on tangible equity is another important target that HSBC is now projecting to drop. Originally forecast to be over 11%, the company no longer believes this figure is realistic, following a reported 6.4% for the current period, as compared to 10.9% for the same period in the year prior.
"The revenue environment is more challenging than in the first half of 2019, and the outlook for revenue growth is softer than we anticipated at the half-year," HSBS mentioned in the statement.