(Alliance News) - HSBC Holdings on Monday posted a first-half earnings slump and said its expected credit loss for 2020 could reach USD13 billion.
In the six months to June 30, revenue fell 8.8% year-on-year to USD26.75 billion from USD29.37 billion, the lender said. Pretax profit dropped 65% to USD4.32 billion from USD12.41 billion a year ago.
During the half, HSBC booked USD6.86 billion in expected credit losses and other impairment charges, up sharply from USD1.14 billion a year ago.
"Our first half performance was impacted by the Covid-19 pandemic, falling interest rates, increased geopolitical risk and heightened levels of market volatility. Despite this, our Asia franchise showed resilience, and our Global Markets business delivered strong growth compared with last year's first half. Having paused parts of our transformation programme in response to the Covid-19 outbreak, we now intend to accelerate implementation of the plans we announced in February. We are also looking at what additional actions we need to take in light of the new economic environment to make HSBC a stronger and more sustainable business," Chief Executive Officer Noel Quinn said.
Restructuring plans, drawn up in February, were for HSBC to cut about 15% of its global workforce in a radical cost-cutting programme.
HSBC's common equity tier 1 capital ratio improved to 15.0% in June from 14.3% a year ago and 14.7% in December.
HSBC said the "the current suspension of dividends on ordinary shares, more than offset the
impact of risk-weighted asset growth".
"We continue to face a wide range of potential economic outcomes for the second half of 2020 and into 2021, partly dependent on the extent of any potential impacts from new waves of Covid-19, the path to the development of a possible vaccine and market and consumer confidence levels. Heightened geopolitical risk could also impact a number of our markets, including Hong Kong and the UK," the bank warned.
HSBC expects an expected credit loss charge between USD8 billion and USD13 billion for the whole of 2020.
HSBC shares were down 4.0% in early trade in London on Monday.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: up 2.17 points at 5,899.93
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Hang Seng: down 0.8% at 24,408.66
Nikkei 225: closed up 2.2% at 22,195.38
DJIA: closed up 114.67 points, or 0.4%, at 26,428.32
S&P 500: closed up 0.8% at 3,271.12
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GBP: down at USD1.3060 (USD1.3125)
EUR: down at USD1.1755 (USD1.1820)
Gold: flat at USD1,973.75 per ounce (USD1,973.70)
Oil (Brent): up at USD43.27 a barrel (USD42.94)
(changes since previous London equities close)
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ECONOMICS AND GENERAL
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Monday's Key Economic Events still to come
Canada Civic Holiday. Financial markets closed.
Ireland August Bank Holiday.
0930 BST UK CIPS-Markit manufacturing purchasing managers' index
0955 CEST Germany manufacturing PMI
1000 CEST EU eurozone manufacturing PMI
0945 EDT US manufacturing PMI
1000 EDT US ISM report on business
1000 EDT US construction spending
1600 EDT US domestic auto industry sales
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Plans for a radical shake-up of a "complex and outdated planning system" in the UK are due to be announced this week, in a bid to speed up the building of new homes, PA reports. UK Housing Secretary Robert Jenrick has proposed a complete overhaul of a system that has been in place since just after the Second World War, and one he said has failed to keep up with the needs of the country. Part of the new process will involve quicker development on land which has been designated "for renewal", with a "permission in principle" approach that the Ministry of Housing, Communities & Local Government said will balance the need for proper checks with a speedier way of working. The other two categories will see land designated for growth where new homes, hospitals and schools will be allowed automatically to empower development, while areas of outstanding natural beauty and the green belt will come under the protection category. The new process will be done through democratic local agreement, be clearer and cut out red tape, the government said.
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Japan's economy contracted at an annualised rate of 2.2% in the first quarter, unchanged from a second preliminary reading, with corporate capital spending worse than initially estimated, the government said. The revised gross domestic product reading in the January-to-March period was in almost in line with the 2.0% decline predicted by analysts surveyed by the Nikkei business daily and followed a 7.2% contraction in the last quarter of 2019. Two straight quarters of negative growth means that Japan has entered a recession due to the coronavirus pandemic. However, a July PMI reading made for better reading for Japan. Output and incoming new work both fell at much slower rates in July across the Japanese manufacturing sector than what was seen throughout the second quarter of the year. The headline au Jibun Bank Japan manufacturing PMI came in at 45.2 in July. This was up from 40.1 in June and the highest score since February. The latest reading remained below the neutral 50.0 value but was well above the 11-year low of 38.4 seen in April.
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BROKER RATING CHANGES
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RBC RAISES NEXT PRICE TARGET TO 6300 (5700) PENCE - 'SECTOR PERFORM'
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RBC RAISES IMI PRICE TARGET TO 1230 (1140) PENCE - 'OUTPERFORM'
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JEFFERIES RAISES MITIE GROUP TO 'BUY' ('HOLD') - TARGET 55 (145) PENCE
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COMPANIES - FTSE 100
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GlaxoSmithKline said it is in advanced discussions with the European Union to supply up to 300 million doses of Covid-19 vaccine, alongside its partner Sanofi. Last week, the UK government signed a deal with GlaxoSmithKline and Sanofi for 60 million doses of the potential Covid-19 vaccine. The vaccine candidate developed by Sanofi in partnership with Glaxo combines a protein-based technology used by Sanofi to produce an influenza vaccine with Glaxo's established adjuvant technology, Glaxo said. The doses would be manufactured in European countries including France, Belgium, Germany and Italy. This marks a key milestone in protecting and serving the European population against Covid-19, the London-based drugmaker noted. Sanofi is leading the clinical development and registration of the Covid-19 vaccine and expects a Phase 1/ 2 study to start in September, followed by a Phase 3 study by the end of 2020. If data are positive, regulatory approval could be achieved by the first half of 2021, Glaxo added. Both companies are committed to making their vaccine affordable and available globally, according to Glaxo.
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National Grid said it has filed a request with the New York Public Service Commission to update electric and gas distribution rates for its upstate New York distribution business Niagara Mohawk, which serves 2.2 million customers. New rates are expected to become effective in July 2021. National Grid said the filing will fund programmes necessary to modernise the electric and gas networks, expand electric vehicle charging and promote economic growth. Further, it includes investment to support affordable decarbonized heating, including the expansion of renewable natural gas to help the state's environmental goals. It also maintains a focus on managing customer affordability in response to the economic downturn caused by Covid-19, the UK grid operator added.
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COMPANIES - FTSE 250
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Hammerson confirmed it is in advanced discussions on a possible disposal of its 50% interest in VIA Outlets to its joint venture partner APG. In addition, the shopping centre-owner is considering a possible equity raise by way of a rights issue to help weather the coronavirus storm. Hammerson said it continues to take "pro-active measures" relating to the management of its cost base and cash-flow and in recent weeks it secured approval for the issuance of up to GBP300 million in debt under the Covid Corporate Finance Facility from the Bank of England. Following the reopening of its flagship destinations across Europe, footfall and sales continue to improve and third-quarter rent collection in the UK - excluding monthly payments and deferrals - has increased to over 30%, Birmingham's Bullring shopping centre owner added.
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The threat of industrial action by workers at gas giant Centrica has been raised in a row over jobs and pay. Members of the GMB union are being asked if they want to vote on launching a campaign of action. The union said its move followed plans to make thousands of staff redundant and make changes to pay and terms and conditions. The GMB said Centrica, which owns British Gas, described its plans as an "insurance policy" and issued statutory notices which the union says could mean the redundancy process starting at the end of November.
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COMPANIES - MAIN MARKET AND AIM
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Metro Bank said it has agreed to acquire RateSetter for GBP2.5 million as part of the high-street bank's ambition to enhance its unsecured lending capability. Metro Bank said it will operate RateSetter as an independent platform and originate loans under both the RateSetter and Metro Bank brands. In addition, Metro Bank said the acquisition brings a talented team, including co-founders Rhydian Lewis and Peter Behrens and Chief Financial Officer Harry Russell. Lewis will join Metro Bank's executive committee and report directly to Metro Bank Chief Executive Daniel Frumkin.
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COMPANIES - GLOBAL
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Societe Generale noted a rebound in trading conditions towards the middle of May, though it was not enough for the French bank to stave off a swing to loss. In the six months to June 30, the company's net banking income dropped 16% to EUR10.47 billion from EUR12.48 billion a year prior. Societe Generale swung to a net loss of EUR1.59 billion for the half from EUR1.74 billion profit. For the second quarter alone, the company posted a net loss of EUR1.26 billion, swinging from profit of EUR1.05 billion. Net banking income plunged 15% annually to EUR5.30 billion.
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Monday's Shareholder Meetings
no events scheduled
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By Tom Waite; thomaslwaite@alliancenews.com
Copyright 2020 Alliance News Limited. All Rights Reserved.
HSBC Holdings (HSBA)
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Next (NXT)
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