HSBC first-half profit plunges 65% as loan provisions rise

By Lawrence White and Alun John

LONDON/HONG KONG (Reuters) – HSBC Holdings PLC posted a 65% tumble in first-half pre-tax profit, more than expected, as the coronavirus pandemic and its impact on businesses forced the Asia-focused bank to boost its loan-loss provisions.

Europe’s biggest bank by assets reported a pre-tax profit for the first six months this year of $4.32 billion, down from $12.41 billion in the same period a year earlier, according to its financial statement filed with the stock exchange.

The profit was lower than the $5.67 billion average of analysts’ estimates compiled by the bank.

HSBC’s results reinforced the trend of lenders across the world increasing their buffers to absorb souring loans at a time when companies – from aviation to retail and hospitality sectors – are reeling from the impact of the COVID-19 pandemic.

The bank’s credit impairment provisions in the first-half soared to $6.9 billion, compared to $1 billion the same period a year earlier, the filing showed. It had set aside $3 billion to cover loan losses in the first quarter.

The bank’s impairment charges included a $1.2 billion writedown on the value of software it owns, mainly in Europe, it said.

HSBC’s revenues fell 9% in the six-month period, as global interest rate cuts and declining market values on assets in investment banking and insurance outweighed higher income from its trading business.

Adding to CEO Noel Quinn’s challenges, the bank has also been caught in the crosshairs of political unrest in Hong Kong, whose economy contracted for the fourth quarter in the April-June period, posting the second biggest drop on record.

“We will face any political challenges that arise with a focus on the long-term needs of our customers and the best interests of our investors,” Quinn said in the statement filed on Monday.

(Reporting by Alun John in Hong Kong and Lawrence White in London; Editing by Muralikumar Anantharaman)