HSBC's Q1 profit halves on higher bad loan provisions

HONG KONG • HSBC Holdings yesterday warned of more earnings pain ahead after first-quarter profit nearly halved as it set aside a hefty US$3 billion (S$4.25 billion) in bad loan provisions due to the coronavirus pandemic.

Europe’s biggest bank said the outbreak would mean sustained pressure on its revenues as customer activity declined and lower interest rates squeezed margins, while noting increased fraudulent activity could lead to “potentially significant” credit losses.

HSBC’s new chief executive, Mr Noel Quinn, faces additional hurdles as plans to cut costs through layoffs – part of a wider restructuring unveiled in February – have been put on hold due to the pandemic.

The bank increased its expected credit impairment charges for January-March by US$2.4 billion to US$3 billion – its highest quarterly level in nine years – and said total provisions for the year could range from US$7 billion to US$11 billion.

Profit before tax for the quarter tumbled 48 per cent to US$3.2 billion, below an average analyst forecast of US$3.7 billion compiled by the bank.

Revenue dropped 5 per cent to US$13.7 billion.

The results were also hit by the slide in oil prices as well as “a significant charge related to a corporate exposure in Singapore”.

HSBC did not name the company, but the lender is among leading creditors to troubled Singapore oil trader Hin Leong Trading.


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