HSBC to overhaul business model as third-quarter profit tumbles 35%

In this news, we discuss the HSBC to overhaul business model as third-quarter profit tumbles 35%.

HONG KONG / LONDON (Reuters) – HSBC Holdings PLC HSBA.L said on Tuesday it will embark on a transformation of its business model, seeking to turn its main source of income from interest rates into paid business.

It has also accelerated downsizing plans and will cut costs more than previously suggested.

The plans were unveiled as the bank posted a 35% drop in quarterly profit less than expected and signaled an easing of its bad debt provisions, citing an expected improvement in the economic outlook for its key markets.

The change in approach marks one of the biggest long-term strategy changes to date for Europe’s largest bank, which has long touted its ability to generate interest income from its larger deposits. $ 1.5 trillion.

But with interest rates around the world now at their lowest and even turning negative, the bank is struggling to charge more for loans to borrowers than it pays depositors, and it has warned that net interest income would remain under pressure.

Reported pre-tax profit for HSBC was $ 3.1 billion for the quarter ended Sept. 30, above the average of $ 2.07 billion analysts’ estimates compiled by the bank.

Its Hong Kong-listed shares rose more than 5%.

Asia-focused HSBC said it expected bad debt losses to be in the lower end of the $ 8 billion to $ 13 billion range set earlier this year.

“These latest forecasts, which continue to be subject to a high degree of uncertainty due to Covid-19 and geopolitical tensions, assume that the likelihood of a further significant deterioration in the current economic outlook is low,” he said. -he declares.

Faced with fewer options to drive revenue growth, HSBC has sought to cut costs globally and in June resumed plans to cut around 35,000 jobs it had shelved after the coronavirus epidemic.

Other measures of the lender’s global restructuring, unveiled in February, include the divestiture of its French business, which it may have to sell at a great loss, Reuters reported last month.

HSBC also said it will accelerate the transformation of its business in the United States, where it has long struggled to compete with much larger local players, and will provide an update on its 2020 annual results in February.

Analysts and some investors have long urged the lender to completely divest its US retail operations, and HSBC said earlier this year it was downsizing its branch network in the world’s largest economy.

HSBC, which like other UK lenders, stopped paying dividends earlier this year at the behest of regulators, said it would communicate a revised dividend policy – also in February. Analysts and investors are worried that the lender will cut long-term payments.

Reporting by Sumeet Chatterjee in Hong Kong and Lawrence White in London; Edited by Edwina Gibbs

Original © Thomson Reuters

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