By Selena Li and Lawrence White
HONG KONG/LONDON (Reuters) -HSBC Holdings reported a sharper-than-expected drop in revenue on Wednesday, harm by write-downs from exposures to a Chinese language financial institution and Hong Kong actual property, whereas the financial institution pushed forward with a worldwide restructuring.
Its 26% hunch in pretax revenue within the first half confirmed the problem forward for CEO Georges Elhedery, as Europe’s largest financial institution racked up losses in China, the place it has more and more pinned its plans for development in recent times after shrinking in Western markets.
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Elhedery, who has unleashed a sweeping restructuring on the financial institution after taking cost final 12 months, mentioned in an earnings convention name that the financial institution began evaluations of its retail banking enterprise in Australia, Indonesia and Sri Lanka, and can begin winding down its Bangladesh retail enterprise within the second half of this 12 months.
The lender’s company and institutional banking companies had been unaffected by these developments, he mentioned.
The financial institution posted a revenue of $15.8 billion for the primary six months of this 12 months, lacking brokers’ estimates of $16.5 billion.
London-listed shares of HSBC fell 4.5%, matching earlier losses in its Hong Kong shares.
The lender’s shares have risen 36% within the final 12 months, because it benefited from larger returns on its lending and grew earnings in its wealth enterprise, although that lagged a 76% achieve over the identical interval in rival Normal Chartered.
HSBC took an additional $2.1 billion hit from its stake in state-run Financial institution of Communications, following a $3 billion impairment it took in February 2024 amid mounting unhealthy loans in China.
CEO Elhedery downplayed the impairments on the financial institution’s BoCom stake, saying it could haven’t any impression on its skill to pay dividends.
“These are accounting-related impairments…they don’t impression the outlook we’ve on the Chinese language financial system, they’re paper losses,” he mentioned on the decision.
The brand new writedown included a $1.1 billion loss because of the Chinese language financial institution’s fundraising earlier this 12 months, which diluted HSBC’s possession.
China’s property market, as soon as a key development driver for the world’s second-largest financial system, has been in a multi-year tailspin regardless of repeated authorities makes an attempt to revive weak shopper demand, which left losses on home lenders’ mortgage books.
HSBC’s anticipated credit score losses grew by $900 million in comparison with the primary half of final 12 months to $1.9 billion, the financial institution mentioned, partly resulting from its publicity to Hong Kong’s troubled industrial actual property sector.
A sluggish property market in Hong Kong may proceed to weigh on the asset high quality of banks working in Hong Kong, analysts from Citigroup mentioned.
