KEY POINTS

  • HSBC is looking to cut down its employee number from 235,000 to 200,000
  • HSBC sees the Covid-19 outbreak in China as the greatest threat to growth in 2020
  • Its CEO admits Covid-19 "has created significant disruption for our staff, suppliers and customers"
  • Longer-term, the bank expects to see revenue reductions from lower lending and transaction volumes

HSBC Holdings plc, the seventh largest bank in the world in 2018 and the largest in Europe, revealed a 33% plunge in pre-tax profit in 2019 to $13.35 billion compared to analysts’ estimate of $20.03 billion.

The huge drop that exceeded analysts' expectations sprang from a goodwill impairment of $7.3 billion to HSBC's long-term economic growth assumptions impacting its European investment banking and commercial banking businesses. The “planned reshaping” of the bank’s global banking and markets business were also to blame. The write-down resulted in a $4.65 pre-tax loss in HSBC’s European business.

In addition, interim CEO Noel Quinn announced a major restructuring that will see the firing of more than 35,000 employees over the next three years. Other key metrics revealed in the earnings release Monday:

  • Revenue for 2019 improved 4.3% year-on-year to $56.1 billion
  • Operating expenses jumped 22.2% to $42.35 billion, mainly due to the goodwill impairment
  • Earnings per share came to $0.30

HSBC’s planned restructuring will see its European business experience lower sales and trading, and equity research. The bank will also transition structured products capabilities from the U.K. to Asia

The bank's U.S. business will see its branch network reduced by 30%. The U.S. operation will be re-positioned as an “international client-focused corporate bank,” with targeted retail offerings.

HSBC's global banking will shift more resources to Asia and the Middle East. It will, however, maintain its global investment banking hub in London.

At the group level, HSBC will consolidate retail banking and wealth management, and global private banking into a new division called Wealth and Personal Banking.

Asia, which accounts for half of HSBC revenue and 90% of profit, and Quinn warned of pressure from the ongoing Covid-19 outbreak rampaging through China and many of its neighboring countries such as Japan, Singapore and South Korea.

"Since the start of January, the coronavirus outbreak has created significant disruption for our staff, suppliers and customers, particularly in mainland China and Hong Kong," said Quinn.

"Depending on how the situation develops, there is the potential for any associated economic slowdown to impact our expected credit losses in Hong Kong and mainland China."

Longer term, Quinn said it's also possible the bank could see revenue reductions from lower lending and transaction volumes, and further credit losses stemming from disruption to customer supply chains.”

HSBC has been trying to lower costs as it faces a multitude of uncertainties caused by the grinding US-China trade war, Britain's departure from the European Union and now the deadly new coronavirus in China HSBC has been trying to lower costs as it faces a multitude of uncertainties caused by the grinding US-China trade war, Britain's departure from the European Union and now the deadly new coronavirus in China Photo: AFP / ISAAC LAWRENCE