The London-based lender said that pre-tax profit in the first half of the year fell 65% to $4.3 billion compared to the same time last year as revenue fell and as credit losses were worse than expected.
“Our first half performance was impacted by the Covid-19 pandemic, falling interest rates, increased geopolitical risk and heightened levels of market volatility,” CEO Noel Quinn said in a statement.
The bank added that expected credit losses for 2020 could hit as much as $13 billion this year, worse than earlier estimates “given the deterioration in consensus economic forecasts.”
The company also disclosed a $1.2 billion writedown due to an “impairment of software intangibles, mainly in Europe.”
Falling income didn’t help either. The bank’s revenue tumbled 9% in the first half versus the same time last year, hurting profits even more.
Prior to the pandemic, HSBC had already been going through severe financial challenges. It announced in February that it would cut around 35,000 jobs and dramatically overhaul its business after profit had plunged by a third in 2019.
Then the coronavirus crisis got worse. The bank suspended most of its restructuring plans earlier this year, saying it hoped to reduce uncertainty for employees amid the pandemic.
Now, Quinn said, the bank will have to “accelerate” those plans, as well as review “what additional actions we need to take in light of the new economic environment to make HSBC a stronger and more sustainable business.”
The CEO also alluded to worsening relations between China and the West, which has put HSBC in a tight spot.
Chinese state media, for instance, has accused HSBC of colluding with the United States in its legal fight against Huawei, the Chinese tech giant. The bank last week denied those allegations.
Quinn acknowledged the impact of geopolitical difficulties on Monday, saying in his statement that “current tensions between China and the US inevitably create challenging situations for an organization with HSBC’s footprint.”
“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,” he added, without elaborating.
Asia continued to be a bright spot in the bank’s earnings.
The company pulled in $7.4 billion in pre-tax profits there over the first half, “demonstrating the strength and continued resilience of our operations in the region and underlining the importance of Asia to the group,” it said.
HSBC shares in Hong Kong dropped 4% following the earnings report. The bank’s stock in London and Hong Kong are both down more than 40% so far this year.