Europe’s biggest bank, HSBC, said Monday that its net profits had plummeted 96% in the second quarter of this year as lower interest rates combined with the downturn due to the coronavirus pandemic took hold.
The bank’s net profit was $192 million in the April-June quarter, down from $4.37 billion reported in the same period a year earlier. Net profit in the first quarter of the year was $1.79 billion.
London-based HSBC has most of its business in Asia, where the pandemic began, first emerging in central China.
Near-zero interest rates meant to help businesses keep running with cheap credit are squeezing margins for lenders. The bank forecasts expected credit losses of $8 billion-$13 billion in 2020, though it said that was "subject to a high degree of uncertainty."
HSBC said its lending in the last quarter fell 3% to $29 billion while deposits rose 6% to $85 billion as customers saved more and spent less.
Revenue slipped 12% to $5.6 billion thanks to slimmer interest rate margins and weaker wealth management activity.
One area of growth was mobile payments, which jumped more than doubled from a year earlier to $71.4 billion.
Earlier this year, the bank said it will shed some 35,000 jobs as part of an overhaul to focus on faster-growing markets in Asia and as it tries to cope with a slew of global uncertainties, from Brexit to the trade wars to the pandemic.
The bank’s chief executive, Noel Quinn, said in a presentation posted online that HSBC had paused its restructuring efforts in the last quarter to focus on supporting its customers.
The bank’s net profit fell 53% to $6 billion in 2019.
"Our first-half performance was impacted by the COVID-19 pandemic, falling interest rates, increased geopolitical risk and heightened levels of market volatility," Noel Quinn, the bank’s chief executive, said in a statement.
Still, he said, HSBC’s Asia business showed "resilience."
"We are also looking at what additional actions we need to take in light of the new economic environment to make HSBC a stronger and more sustainable business," Quinn said.
HSBC’s troubles reflect those of the wider banking industry. Apart from low-interest rates, in Europe, many banks are still dealing with problems left over from the financial crisis.