Higher than expected credit losses and other impairment charges (ECL) dragged down HSBC’s H1 2020 profits by 69% to $3.1b, including a $1.2b impairment of software intangibles mainly in Europe, according to an announcement.
Revenue slipped 9% to $26.7b on the back of interest rate cuts and market impacts in life insurance manufacturing and adverse valuation adjustments in global banking and markets, the bank said. Net interest margin went down 18bp to 1.43% for H1 whilst also declining to 1.33% for Q2 2020.
Reported ECL hiked to $6.9bn as a result of the pandemic and the forward economic outlook, in addition to an increase in charges related to specific wholesale customers. Annualised ECL as a percentage of average gross loans and advances to customers was 1.33%, whilst allowance for ECL against loans and advances to customers increased to $13.2b at end-June.
On the other hand, the bank reported a profit before tax in Asia at $7.4b despite higher ECL, highlighting the strength and resilience of its operations in the region.
HSBC expects an ECL charge from $8bn to $13bn for 2020, subject to a high degree of uncertainty due to the pandemic and geopolitical tensions. It is higher than at Q1 given the deterioration in consensus economic forecasts and actual loss experience during Q2, it explained.