Europe's largest bank HSBC is looking for salvation in Asia after a profit slump. The British institute wants to expand business with wealthy customers in China, as bank chief Noel Quinn announced on Tuesday. “The world around us changed massively in 2020. We are adapting our strategy to the new circumstances.” In 2020, the corona crisis left deep marks on the balance sheet of the financial institution, which has its roots in Hong Kong and generates the majority of its profits in Asia.
“We want to focus on the areas where we are strongest,” said Quinn. Asset management in China and neighboring regions is to be expanded. Investment banking jobs are being relocated there from Europe and North America. Around 6 billion dollars (almost 5 billion euros) in investments will flow there over the next five years. On the other hand, the money house wants to withdraw from the USA and France.
With the new strategy, Quinn is responding to the continuing pressure on earnings from the low interest rates in Europe and the USA. To combat the economic consequences of the corona pandemic, the central banks had again significantly lowered key interest rates. A quick change in monetary policy is not in sight. In Asia, the corona pandemic is largely over, while the European countries are preparing for a third wave and the national economies are suffering. Deutsche Bank also wants to do more business in Asia in the future and hopes for more income.
A look at last year's results shows how important Asia is for HSBC today. The bank made a pre-tax profit of $ 12.8 billion there, while in Europe it made a loss of $ 4.2 billion. Overall, pre-tax profits slumped by a third to $ 8.8 billion. Revenues fell ten percent to $ 50.4 billion. Bad loan loss provisions rose $ 5 billion to $ 8.8 billion, but remained at the lower end of the forecast range.
Analysts had expected an even stronger decline in earnings. However, investors were unsettled because of the subdued return expectations. HSBC shares listed on the London Stock Exchange fell by around one percent.
HSBC expects a margin of ten percent instead of a return of ten to twelve percent, said CFO Ewen Stevenson. Further job cuts in administrative areas are necessary to save costs. In 2020, the money house cut 11,000 jobs. According to earlier information, 35,000 jobs of the group-wide 230,000 positions will be lost worldwide in the coming years. Investors receive a dividend of 15 US cents per share. However, they will no longer receive a quarterly dividend as before, but from next year 40 to 55 percent of profits – significantly less than before.
HSBC – Hong Kong and Shanghai Banking Corporation – was founded in Hong Kong in 1865 to finance the trade of British companies in Asia. After the bank took over the British Midland Bank in 1992, it relocated its headquarters to London.
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