HSBC India ops profit falls 1.8%

HSBC’s India operations on Tuesday reported a 1.8% year-on-year (y-o-y) fall in profit before tax in 2020 to $1,006 million. The bank’s global operations saw profit after tax fall 30% to $6.1 billion from higher expected credit losses and other credit impairment charges (ECL) and lower revenue, partly offset by a fall in operating expenses.

India is the third largest contributor to the global banking major’s profits, after Hong Kong and mainland China. In the India business, the global banking & markets and corporate centre divisions reported a drop in profits, while the commercial banking and wealth & personal banking verticals saw an increase in profit before tax.

As on December 31, 2020, HSBC had a total workforce equivalent to 2.26 lakh full-time employees compared with 2.35 lakh at the end of 2019 and 2.29 lakh at the end of 2018. Of these, 39,000 people were employed in the India business, which houses the bank’s second largest workforce after the UK.

Noel Quinn, group chief executive, said that in 2020, the bank’s employees delivered an exceptional level of support for its customers in very tough circumstances, while its strong balance sheet and liquidity gave reassurance to those who rely on the bank. “The growth plans we are announcing today aim to establish HSBC as a dynamic, efficient and agile global bank with a digital-first mindset, capable of providing a world-leading service to our customers and strong returns for our investors. We intend to deliver them at pace,” Quinn said.

HSBC’s reported revenue was down 10% y-o-y to $50.4 billion, primarily due to the progressive impact of lower interest rates across its global businesses, in part offset by higher revenue in the global markets segment. Adjusted revenue fell 8% to $50.4 billion. The net interest margin (NIM) stood at 1.32% in 2020, down 26 basis points (bps) from 2019, due to the impact of lower global interest rates.

Reported ECL was up $6.1 billion to $8.8 billion, mainly due to the impact of the Covid-19 outbreak and the forward economic outlook. Allowance for ECL on loans and advances to customers rose to $14.5 billion on December 31, 2020 from $8.7 billion as on December 31, 2019. Reported operating expenses were down 19% to $34.4 billion, mainly due to the non-recurrence of a $7.3 billion impairment of goodwill. Adjusted operating expenses down 3% to $31.5 billion, as cost-saving initiatives and lower performance-related pay and discretionary expenditure more than offset the growth in investment spend.

During 2020, deposits grew by $204 billion on a reported basis and $173 billion on a constant currency basis, with growth in all global businesses. The common equity tier 1 (CET1) ratio stood at 15.9%, up 1.2 percentage points from 14.7% as on December 31, 2019.

In its outlook, HSBC said that it recognises a number of fundamental changes, including the prospect of prolonged low interest rates, the significant increase in digital engagement from customers and the enhanced focus on the environment, and it has aligned its strategy accordingly. “We intend to increase our focus on areas where we are strongest, increase and accelerate our investments, and continue to progress with the transformation of our underperforming businesses. As part of our climate ambitions, we have also set out our plans to capture the opportunities presented by the transition to a low-carbon economy,” the bank said.