HSBC recorded a 26 percent drop in first-half pre-tax profit, falling short of analyst expectations amid mounting losses in China and growing credit risks linked to Hong Kong’s troubled commercial real estate market, according to multiple media outlets.
The US$15.8 billion result – announced Wednesday – came in below the multinational lender’s US$16.5 billion forecast and was significantly down from the US$21.6 billion seen in the same period last year. Revenue also fell 9 percent, to US$34.1 billion.
A US$2.1 billion writedown on the bank’s stake in China’s state-owned Bank of Communications weighed heavily on earnings and was its second multibillion-dollar hit in two years. HSBC has said the losses were mainly accounting-related and would not affect its dividend plans.
The bank also reported US$1.9 billion in expected credit losses, up US$900 million from a year earlier. About US$500 million of that was linked to offices and retail properties in Hong Kong, where oversupply continues to drive down rents and capital values.
Hang Seng Bank, 62 percent owned by HSBC, saw its shares drop nearly 7 percent after revealing a sharp rise in credit charges tied to Hong Kong property.
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HSBC has warned that geopolitical risks, including renewed US trade tariffs, could affect future profitability. In a downside scenario, the bank may miss its target of achieving a mid-teens return on tangible equity.
The bank also announced a new share buyback scheme worth up to US$3 billion, on top of a US$3 billion plan announced earlier this year, and will pay an interim dividend of 10 cents per share.
CEO Georges Elhedery said in an earnings call that HSBC was reviewing its retail banking business in Australia, Indonesia and Sri Lanka, and would start winding down its Bangladesh retail business in the second half of this year.
HSBC’s corporate and institutional banking division was a rare bright spot, reporting a 4 percent rise in first-half profit to US$6.4 billion.
