HSBC’s chief executive Noel Quinn has had an unenviable first year on the job. In 2020 alone, Quinn rolled out a major restructuring plan that will involve at least 35,000 job cuts, battled the financial impact of Covid in both Asia and Europe, and steered the bank through a geopolitical storm over its response to democracy clashes in Hong Kong.
Now he is set to preside over the bank’s second straight year of declining annual profits.
HSBC is expected to reveal a 38% drop in pre-tax takings from $13.3bn to $8.3bn when it reports its full-year results on Tuesday. It will be the latest lender stung by a surge in bad debt provisions, meant to protect from potential defaults linked to the pandemic. Those provisions are expected to total $9.1bn for 2020, according to consensus estimates, up from just $2.8bn a year earlier.
HSBC bankers are likely see their bonus pool shrink again, following a 3.8% drop to $3.3bn in 2019. Quinn and HSBC’s finance chief Ewen Stevenson have already waived their cash bonus for 2020 and donated 25% of their salaries in light of the Covid crisis.
But shareholders are still poised for payouts. HSBC is likely to become the latest UK lender to restart dividend payments after the Bank of England lifted a temporary ban that forced it to scrap a $4.2bn payment to shareholders last spring. That ban was lifted – with limits – in December.
The chief executive will give an in-depth business update on Tuesday, one year on from announcing major job cuts and a new strategy. The backdrop is gloomy. In October, Quinn warned that the days of free standard banking for UK customers could be over, as it tries to find new income to compensate for low interest rates. HSBC could come under greater pressure if the Bank of England pushes interest rates below zero later this year.
In the meantime, the London-headquartered bank is likely to face more tough questions on whether it is backing the wrong horse in the battle over Hong Kong. It has faced criticism in the west for supporting China’s controversial security law, and for freezing the accounts of pro-democracy protesters who critics say are the real target of Bejing’s crackdown.
MPs on the UK’s foreign affairs committee were left exasperated last month, after Quinn repeatedly refused to comment on issues of “democracy or political systems” and said his main motivation was to help Hong Kong’s economy and its citizens “through the current challenges”. He also ruled out exiting the Hong Kong market, saying it “would only harm” local customers.
HSBC makes the majority of its profits in Hong Kong and China.
In the UK, HSBC is being targeted by climate campaigners, backed by fifteen pension and investment funds, who want to force the bank to slash its exposure to fossil fuels – starting with coal – within a timeline consistent with Paris climate goals.
They a have filed the second-ever climate vote at a major UK bank, following a similar resolution tabled at Barclays’ AGM last year.
While HSBC has pledged to shrink its carbon footprint to net zero by 2050, the current climate plan stops short of a blanket ban on financing coal power, and does not allow it to turn away clients or cancel contracts based on their fossil fuel exposure. HSBC is Europe’s second-largest financier of fossil fuels after Barclays, according to the Rainforest Action Network (RAN).
The vote isn’t until May, so investors will have to wait to see whether HSBC will support the resolution, or follow Barclays’ lead and table an alternative proposal.