HSBC Q1 profit halves on higher bad loan provisions, including a 'Singapore corporate exposure'

HONG KONG (REUTERS, BLOOMBERG) – HSBC Holdings’ first-quarter profit nearly halved from a year-ago, missing estimates, after boosting provisions against bad loans as the coronavirus pandemic hits borrowers worldwide.

Europe’s biggest bank by assets said profit before tax came in at US$3.21 billion (S$4.56 billion) for January-March, down from US$6.21 billion a year ago and below an average analyst forecast of US$3.67 billion compiled by the bank.

The bank increased its expected credit impairment charges by a hefty US$2.4 billion to US$3 billion due to the impact of Covid-19 and weakening oil prices as well as “a significant charge related to a corporate exposure in Singapore”, it said.

According to media reports, HSBC has the biggest exposure at about US$600 million among lenders to troubled Singapore oil trader Hin Leong Trading. Hin Leong on Monday was placed under the management of a court-appointed supervisor as it seeks to restructure close to US$4 billion in debt. The company is also under investigation by the Singapore police after its founder  Lim Oon Kuin admitted to hiding about US$800 million in losses racked up in futures trading.

HSBC on Tuesday warned the impact of the pandemic on the global economy would mean a rise in bad loans, and sustained pressure on its revenues as customer activity declined and lower central bank interest rates squeezed margins.

It also said a rise in fraudulent activity could lead to “potentially significant” credit losses.

The London-headquartered bank said it plans to reduce its operating costs to try and mitigate the fall in revenue, leading to “materially lower” profitability in 2020 than last year.

HSBC said last week it is pressing ahead with plans outlined in February to shift capital from underperforming businesses, reduce costs and strip out layers of management.

But it has paused job cuts to avoid disruption and leaving staff unable to find work elsewhere.

At the behest of UK regulators, HSBC also canceled its dividend, angering key investors in Hong Kong and sending its shares down to an 11-year low this month. 

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