HSBC saw its pre-tax profit plummet by 65% in the first half of the year as the UK’s largest bank was forced to hike funds to cover bad loans due to the coronavirus.
The lender reported profits of $4.3bn (£3.2bn) in the half year to 30 June, down from $12.4bn (£9.5bn) for the same period in 2019.
HSBC’s results reflected the trend of lenders globally increasing their financial buffers to absorb loan losses as companies reel from the impact of the COVID-19 crisis.
In response to the coronavirus pandemic the bank’s provision for bad debts in the first-half soared to $6.9bn (£5.3bn), compared to $1bn (£760m) for the same period a year earlier.
It had set aside $3bn (£2.3bn) to cover loan losses in the first quarter.
HSBC said its total provisions against loan losses could be between $8bn (£6.1bn) and $13bn (£10bn) in 2020 – up from its April forecast due to the deteriorating global economic outlook and worse-than-expected actual losses in the second quarter.
The bank has suffered a turbulent year on the markets with the London listed shares falling more than 40% from 595p to 342p as of 30 June.
Group chief executive Noel Quinn said: “Our first half performance was impacted by the COVID-19 pandemic, falling interest rates, increased geopolitical risk and heightened levels of market volatility.”
Mr Quinn had put the brakes on a large-scale redundancy programme as the coronavirus took hold.
However, plans to cut around 35,000 jobs worldwide will be accelerated.
The company will also look at other measures to take “in light of the new economic environment to make HSBC a stronger and more sustainable business”, Mr Quinn said in the half year results.
HSBC, along with other banks, complied with a Bank of England request to shelve dividends for shareholders on 1 April, with the bank saying it would not make payouts or have share buy-backs until the end of 2020.
In its update HSBC said its future dividend policy would be reviewed and added: “Lower global interest rates and reduced customer activity have put increasing pressure on revenue, and are expected to continue to do so.”
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