1Q 2020 update

The 1Q 2020 Earnings Release, investor presentation and data pack are available to download.

At a glance

We aim to deliver long-term value for our shareholders through our extensive international network, access to high-growth markets and balance sheet strength.

3.2 billion
US dollars
Reported profit before tax in the first quarter of 2019 is 6.2 billion US dollars.
3.0 billion
US dollars
Adjusted profit before tax in the first quarter of 2019 is 6.2 billion US dollars.
13.3 billion
US dollars
Adjusted revenue in the first quarter of 2019 is 14.1 billion US dollars.
14.6
PER CENT
Common equity tier 1 ratio as of 31 December 2019 is also 14.7 per cent.

Key highlights


  • Profits were affected by COVID-19 and the fall in oil prices, with reported profit before tax (PBT) down 48% on 1Q19 and adjusted PBT down 51%

  • Adjusted revenue was $13.3bn, down 6% on 1Q19, negatively affected by $1.6bn of volatile items

  • We demonstrated control on costs, with reported costs of $7.9bn, down 5% on 1Q19; adjusted costs of $7.7bn, down 3%

  • Adjusted expected credit losses (ECL) charge of $3.0bn, up $2.3bn on 4Q19; adjusted ECL as a percentage of gross average loans and advances to customers was 1.18%, compared with 0.24% in 1Q19

  • Our balance sheet remains resilient, with a common equity tier 1 ratio of 14.6% and a robust liquidity and funding position

  • Return on tangible equity of 4.2% and earnings per share of $0.09

Group Chief Executive

“HSBC has always been there for our customers in times of crisis, and we are working hard to support them during this unprecedented period of disruption. We do so from a position of strength, with robust levels of capital, funding and liquidity. The market-specific support measures that we are offering our personal and business customers have had strong take-up, and we remain responsive to their changing needs. We are also working closely with governments around the world to channel fiscal support to the real economy quickly and efficiently.”


Noel Quinn, HSBC Group Chief Executive
28 April 2020

Our response to COVID-19

>£1.9bn
GBP
Fact: we have approved more than £1.9bn of commercial lending for COVID-19 related financial support in the UK.
80
PER CENT
Fact: 80% of our branch network remains open for business globally.
>HK$30bn
HK DOLLARS
Fact: In Hong Kong, we have extended [more than HK$30bn] in relief to business customers across a number of schemes.

Operational response

Our operations have stayed highly resilient:

  • Around 80% of our branch network remains open for business globally
  • The rapid deployment of technology has enabled around 217,000 colleagues, more than 90% of our total workforce, to work from home

This has allowed our global businesses to maintain an excellent level of service, responding quickly and effectively to the development of COVID-19, and supporting our customers.

Customer response

We are participating in a number of COVID-19 relief programmes and deploying a range of support measures for our customers at pace.

In the UK, we have:

  • Approved more than 118,000 applications for payment holidays for retail customers
  • Approved more than GBP1.9bn of commercial lending for COVID-19 related financial support
  • Approved more than 4,200 loans under the Coronavirus Business Interruption Loan Scheme worth more than GBP600m, around 17% of all CBILS lending, compared with our UK SME lending market share of around 9%

In Hong Kong, we have extended more than HK$30bn in relief to business customers across a number of schemes.

Implications for our business update

The vision for the bank we set out with our 2019 Annual Results is unchanged. HSBC will become a stronger, leaner and more customer-focused bank.

However, we have paused the vast majority of redundancies to support our staff and to reduce the uncertainty they are facing at this difficult time. We have also temporarily delayed some elements of our cost and risk-weighted asset (RWA) reduction programme, and expect restructuring costs for 2020 to be lower than indicated at full-year results.

Many elements of our transformation programme are moving forward as planned – including combining the wholesale banking middle and back office, establishing an RWA optimisation unit, and the creation of our Wealth and Personal Banking business.

Following a written request from the Bank of England through the Prudential Regulation Authority, we cancelled the 4Q19 interim dividend of $0.21, and decided to make no ordinary share dividend payments until the end of 2020.

Supporting our customers

Retail Banking and Wealth Management
<p>1Q20 adjusted profit before tax</p> <p>(1Q19: $2.2bn)</p> <br> <ul> <li>Continued organic growth in our customer base, with more than 100,000 additional active customers in 1Q20</li> <li>Diversified deposit growth, with more than $13bn increase in 1Q20 across most key markets</li> <li>Enhanced digital capabilities, enabling accelerated digital journeys to support customers, including Digital Identification and Verification for UK Current Accounts, launch of FlexInvest in Hong Kong and we are working with our various regulators to further enable digital sales</li> </ul>
Commercial Banking

<p>1Q20 adjusted profit before tax</p> <p>(1Q19: $2.0bn)</p> <br> <ul> <li>Rapid deployment of portals for relief measures; UK customers are able to apply for loans in less than 10 minutes</li> <li>Accelerated release of digital capabilities, including mobile authentication, mobile cheque deposits and online documents </li> <li>Ongoing investment in technology has enabled us to support customers, with HSBCnet mobile downloads up 32% during 1Q20</li> <li>Growth in lending balances of $16bn (5%), as we support the liquidity and working capital needs of our customers</li> </ul>
Global Banking and Markets
<p>1Q20 adjusted profit before tax</p> <p>(1Q19: $1.6bn)</p> <br> <ul> <li>Led more than $685bn of financing so far this year for clients in the capital markets globally. This includes supporting clients to raise $19.9bn through social and Covid-19 response bonds to mobilise crisis relief measures </li> <li>Debt Capital Markets (DCM): top 2 bookrunner of international bonds in Europe, the Middle East and Asia (excluding Japan)</li> <li>Equity Capital Markets (ECM): top 2 bookrunner in Asia ECM (excluding Japan and excluding A-shares); HSBC has raised more primary equity capital so far this year for UK-listed corporates than any other bank</li> <li>2020 Greenwich Global Service Quality Leader for Corporate FX</li> </ul>
Global Private Banking

<p>1Q20 adjusted profit before tax</p> <p>(1Q19: $0.1bn)</p> <br> <ul> <li>Revenue up 13% compared with 1Q19, mainly from growth in investment and lending revenue in Asia and Europe, driven by high volatility in equity markets</li> <li>Net new money up $5.3bn over 1Q20, $17.7bn added in the past 12 months</li> <li>Digital platform launched globally, Digital Advisory rollout launched</li> </ul>

Outlook

The outlook for world economies in 2020 has substantially worsened in the past two months. The impact and duration of the COVID-19 crisis will likely lead to higher expected credit losses and put pressure on revenue due to lower customer activity levels and reduced global interest rates.

We plan to reduce operating expenses to partly mitigate the reduction in revenue and we intend to continue to exercise cost discipline, while maintaining strategic investment. These factors are expected to lead to materially lower profitability in 2020, relative to 2019.

We have temporarily delayed parts of our transformation, including some elements of our cost and RWA reduction programme, and expect restructuring costs for 2020 to be lower than indicated in our 2019 annual results. We also expect mid-to-high single digit percentage growth in RWAs in 2020, including as a result of the effects of negative credit rating migration movements, impacting our common equity tier 1 ratio.

During 2020, we will continue to assess the impact of the COVID-19 crisis and review our financial performance and business plan accordingly. We will assess the appropriateness of our medium-term financial targets during that period, and will review our dividend policy at, or ahead of, our year-end results for 2020.

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