HSBC marks 53% drop in net profit in 2019, process for appointing Group CEO continues

Maria Nikolova

HSBC expects to make an appointment within the 6 to 12 months initially outlined.

HSBC has earlier today posted its report for 2019, with earnings sharply down.

During 2019, HSBC saw reported profit attributable to ordinary shareholders fall 53% to $6 billion, materially impacted by a goodwill impairment of $7.3 billion. Reported profit before tax staged a drop of 33% to $13.3 billion.

On the brighter side, reported revenue was up 4%.

There was goodwill impairment of $7.3 billion, primarily due to $4 billion related to Global Banking and Markets (‘GB&M’) and $2.5 billion in Commercial Banking (‘CMB’) in Europe. This reflected lower long-term economic growth rate assumptions, and additionally for GB&M, the planned reshaping of the business.

Adjusted revenue rose 5.9% to $55.4 billion and adjusted profit before tax grew 5% to $22.2 billion, reflecting good revenue growth in Retail Banking and Wealth Management (‘RBWM’), Global Private Banking (‘GPB’) and CMB, together with improved cost control.

Adjusted revenue in Asia increased 7% to $30.5 billion and adjusted profit before tax rose 6% to $18.6 billion. Within this, there was a resilient performance by Hong Kong, with adjusted profit before tax rose 5% to $12.1 billion.

HSBC posted earnings per share of $0.30, including a $0.36 per share impact of the goodwill impairment. Dividends per share in respect of 2019 were $0.51.

HSBC stresses that it continues to monitor the recent coronavirus outbreak, which is causing economic disruption in Hong Kong and mainland China and may impact performance in 2020.

HSBC also provided an update on the Group Chief Executive process. The process for appointing a permanent Group Chief Executive is ongoing and HSBC expects to make an appointment within the 6 to 12 months initially outlined.

HSBC plans to reduce capital and costs in its underperforming businesses to enable continued investment in businesses with stronger returns and growth prospects, including in RBWM and in all its businesses in Asia. The Group also plans to simplify its complex organisational structure, including a reduction in Group and central costs, while improving the capital efficiency of the Group.

The Group will target:

  • a gross RWA reduction of over $100 billion by the end of 2022, with these RWAs to be reinvested, resulting in broadly flat RWAs between 2019 and 2022;
  • a reduced adjusted cost base of $31billion or below in 2022, underpinned by a new cost reduction plan of $4.5 billion; and
  • a reported RoTE in the range of 10% to 12% in 2022, with the full benefit of the cost reductions and redeployed RWAs flowing into subsequent years.

HSBC plans to suspend share buy-backs for 2020 and 2021, given the high level of restructuring expected to be undertaken over the next two years. The Group intends to return to neutralising scrip dividend issuance from 2022 onwards.

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