The lender giant saw first-quarter profit drop $1.6 billion to $4.2 billion, a drop that is likely to be repeated across the industry due to wartime bad loans. Ukraine increased.
Wall Street banks have also reported similar drops.
Banks are under pressure to enforce Russia sanctions imposed by the government and regulators. CEO Noel Quinn said: “HSBC Russia is not accepting new businesses or customers and therefore is on a downward trend. Much of our business in Russia serves multinational corporate clients with headquarters in other countries, and as a global bank, HSBC is responsible for helping them manage their this difficult situation. “
HSBC is currently not paying a quarterly dividend, which it will review next year.
Chief Financial Officer Ewen Stevenson noted that potentially rising interest rates will protect margins and, in turn, dividends. “We are very sensitive to interest rates,” he said.
On the Russian side, he added: “There are differences between banks and manufacturing companies. We have 300 multinational customers there; we have their deposit, we pay their employer. We have a fiduciary duty to them.”
Shares in HSBC today fell 20p to 482p but are up 15 per cent from a year ago.
“The Russo-Ukrainian war continues to have devastating consequences both inside and outside Ukraine,” Quinn added.
Rob Murphy of Edison Group said:
“Amid continued uncertainty in the world economy, HSBC managed to beat analyst expectations in this quarter’s set of results. Profits were significantly impacted by a new uptick in markets. COVID-19 cases and restrictions in Hong Kong, representing HSBC’s largest market.
Revenue was also under pressure as weaker equity and debt markets impacted Personal Assets and Banking as well as the Global Debt Market and Primary Investments in Global Banking and Markets. On the positive side, the bank continued to benefit from a higher interest rate environment with net profit margin increasing by 5 percentage points to 1.26%. ”
Tier 1 common equity ratio fell 1.7% mainly due to regulatory changes and expected buyback program.
With HSBC in the midst of a multi-year strategic pivot to Asia, repurposing more than $100 billion of capital and downsizing operations in Europe and the Americas, the future success of its Lenders are tied to the continued growth of their Asian operations.