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HSBC 2020 INTERIM RESULTS – HIGHLIGHTS

idpickering
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HSBC 2020 INTERIM RESULTS – HIGHLIGHTS

#330452

Postby idpickering » August 3rd, 2020, 6:18 am

Moderator Message:
Moved to Banking sector (leaving a link) as almost none of the discussion is involved with the practical running of an HYP. - Chris


Noel Quinn, Group Chief Executive, said:
“Our first half performance was impacted by the Covid-19 pandemic, falling interest rates, increased geopolitical risk and heightened
levels of market volatility. Despite this, our Asia franchise showed resilience, and our Global Markets business delivered strong growth
compared with last year’s first half. Having paused parts of our transformation programme in response to the Covid-19 outbreak, we now
intend to accelerate implementation of the plans we announced in February. 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.”
“Current tensions between China and the US inevitably create challenging situations for an organisation with HSBC’s footprint. We will
face any political challenges that arise with a focus on the long-term needs of our customers and the best interests of our investors.”
Financial performance (vs 1H19)
• Reported profit after tax down 69% to $3.1bn and reported profit before tax down 65% to $4.3bn from higher expected
credit losses and other credit impairment charges (‘ECL’) and lower revenue. Reported profit in 1H20 also included a $1.2bn
impairment of software intangibles, mainly in Europe.
• In Asia, we reported profit before tax of $7.4bn in 1H20, despite higher ECL, demonstrating the strength and continued
resilience of our operations in the region and underlining the importance of Asia to the Group. Higher ECL charges
materially impacted profitability in our markets across the rest of the world, notably in our operations throughout Europe.
• Reported revenue down 9% to $26.7bn, reflecting the impact of interest rate reductions, as well as adverse market impacts in life
insurance manufacturing and adverse valuation adjustments in Global Banking and Markets (‘GBM’), notably in 1Q20. These factors
more than offset higher revenue in Global Markets.
• Net interest margin (‘NIM’) of 1.43% in 1H20, down 18 basis points (‘bps’) from 1H19. NIM in 2Q20 was 1.33%, down
21bps from 1Q20, primarily reflecting the initial impact of the reduction in interest rates due to the Covid-19 outbreak.
• Reported ECL increased by $5.7bn to $6.9bn due to the impact of the Covid-19 outbreak and the forward economic outlook, and
due to an increase in charges related to specific wholesale customers. ECL (annualised) as a percentage of average gross loans and
advances to customers was 1.33% in 1H20, while allowance for ECL against loans and advances to customers increased from $8.7bn
at 31 December 2019 to $13.2bn at 30 June 2020.
• Reported operating expenses down 4%, despite a $1.2bn impairment of software intangibles. Adjusted operating expenses
fell 5%, despite continued investment, due to lower performance-related pay and reduced discretionary costs.
• In 1H20, lending decreased by $18bn on a reported basis. On a constant currency basis, lending increased by $12bn,
reflecting corporate customers drawing on existing and new credit lines and re-depositing these to increase cash balances in 1Q20,
which was partly offset by paydowns in 2Q20. Deposits grew by $93bn on a reported basis and $133bn on a constant
currency basis, with growth in all global businesses, including through the depositing of loans from government-backed schemes.
• Common equity tier 1 capital (‘CET1’) ratio of 15.0%, up 30bps from 4Q19, as higher CET1 capital, which included an
increase from the cancellation of the 4Q19 dividend and the current suspension of dividends on ordinary shares, more than offset the
impact of risk-weighted asset (‘RWA’) growth.


Downloadable item here;

https://www.hsbc.com/investors/results- ... ouncements

There is mention further down regarding dividends, and that they would be reported on further at the full year results stage.

Ian.

idpickering
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Re: HSBC 2020 INTERIM RESULTS – HIGHLIGHTS

#330457

Postby idpickering » August 3rd, 2020, 7:07 am

Audio webcast & conf call in relation to the above, posted on Company News Board here;

viewtopic.php?f=94&t=16328&p=330456#p330456

RNS re results announcement here;

https://www.investegate.co.uk/hsbc-hold ... 00068496U/

Including the mention of the dividend I spoke about earlier, here;

On 31 March 2020, HSBC announced that, in response to a request from the Bank of England through the UK's Prudential Regulation Authority ('PRA'), the Board had cancelled the fourth interim dividend for 2019 of $0.21 per ordinary share, which was scheduled to be paid on 14 April 2020. The Board also announced that until the end of 2020 HSBC will make no quarterly or interim dividend payments or accruals in respect of ordinary shares.

The Board intend to provide an update on our dividend policy at our year-end results for 2020, when the economic impact of the Covid-19 outbreak is better understood. We will also take into account the views of our shareholders, the interests of our other stakeholders and other factors, including our financial performance and capital position.

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Re: HSBC 2020 INTERIM RESULTS – HIGHLIGHTS

#330462

Postby Dod101 » August 3rd, 2020, 7:32 am

These sound better than expected results to me including the CET1 ratio of 15% which is ridiculously high I think, of course mostly cause by the suspension of the dividends.

Pity they have given no info re the planned restructuring.

Dod

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Re: HSBC 2020 INTERIM RESULTS – HIGHLIGHTS

#330472

Postby idpickering » August 3rd, 2020, 8:23 am

These results are not well received on a weak market opening, with HSBC being down nearly 4% as I type. I have no holding in these nowadays, and am in no rush to buy back into them either.

Ian.

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Re: HSBC 2020 INTERIM RESULTS – HIGHLIGHTS

#330481

Postby Dod101 » August 3rd, 2020, 9:00 am

I do not think I would be buying them now either Ian. Do you hold Lloyds? Banks in general are bad news. HSBC is the only one I hold although I am looking to buy a Canadian one

Dod

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Re: HSBC 2020 INTERIM RESULTS – HIGHLIGHTS

#330484

Postby OLTB » August 3rd, 2020, 9:07 am

Dod101 wrote:I do not think I would be buying them now either Ian. Do you hold Lloyds? Banks in general are bad news. HSBC is the only one I hold although I am looking to buy a Canadian one

Dod


Hi Dod - I hold HSBC and just wondered if you think banks are bad news long term or just in the short term? Do you mean just European / Far Eastern banks as you are looking at Canadian banks? I am aware that your working life was for a time in the Far East so your experience is valuable! My Uncle lives in Toronto (many years retired) and used to work at a fairly senior level for the Royal Bank of Canada and he is always saying what a well run bank that was. I am not needing my HSBC dividends for over a decade yet as I am not retiring until then so won’t be making any changes and just hope that dividends make a reappearance before then.

Cheers, OLTB.

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Re: HSBC 2020 INTERIM RESULTS – HIGHLIGHTS

#330487

Postby idpickering » August 3rd, 2020, 9:19 am

Dod101 wrote:I do not think I would be buying them now either Ian. Do you hold Lloyds? Banks in general are bad news. HSBC is the only one I hold although I am looking to buy a Canadian one

Dod


Hi Dod. No I don’t hold Lloyd’s any more either. I have no bank shares in my HYP currently.
That’s not to say I might not buy them in the future, when the COVID19 situation eases, and they start paying dividends again. Right now they’re a no no for HYPs imho tbh.

Ian.

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Re: HSBC 2020 INTERIM RESULTS – HIGHLIGHTS

#330490

Postby Dod101 » August 3rd, 2020, 9:25 am

Hmm! I am taking advice from a cousin who is financially savvy and who lives near Toronto. She is into Canadian banks for their reliable dividends, and they all seem well run institutions, at least for the investor. Like most things Canadian they are conservative and seem to quietly get on with their business. Anecdotally, their service to customers is expensive and not very extensive but that is good for the investor. There has also been recent extensive coverage on these Boards.

As for HSBC, it is a very well capitalised bank (even more so now when not paying dividends or these large bonuses) Remember the financial crisis of 2008/9 when they were the only UK bank to continue lending to the interbank market throughout. it would not surprise me if they throw in their lot with China in the longer term. I suspect that they will resume paying dividends as soon as the PRA allows them to do so. If someone has not been to Hong Kong and lived there it may be difficult to understand the feelings that the locals have for HSBC. Many would touch no other bank and many hold HSBC shares for the dividend.

I would not though touch the UK facing Lloyds nor of course RBS or, as we should now say, NatWest.

Sorry but I cannot tell you much more.

Dod

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Re: HSBC 2020 INTERIM RESULTS – HIGHLIGHTS

#330491

Postby monabri » August 3rd, 2020, 9:29 am

"Noel Quinn, HSBC’s chief executive, said: “Our first half performance was impacted by the Covid-19 pandemic, falling interest rates, increased geopolitical risk and heightened levels of market volatility.”

I wonder if Covid-19 is the least of the concerns stated?

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Re: HSBC 2020 INTERIM RESULTS – HIGHLIGHTS

#330522

Postby Dod101 » August 3rd, 2020, 11:00 am

Market volatility and low interest rates were at least to some extent caused by the Covid business. Geopolitical risks are nothing new for HSBC. They have lived with them more or less since it was founded. So the only thing different for HSBC is the geopolitical risk. They are well used to that.

Dod

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Re: HSBC 2020 INTERIM RESULTS – HIGHLIGHTS

#330640

Postby monabri » August 3rd, 2020, 6:02 pm

a return of a 50c dividend on a share price of 332p...circa 11.7% yield...

I would imagine that any return to paying a divi will be at a lower payout.

(Based on IMB & RDSB as precedents).

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Re: HSBC 2020 INTERIM RESULTS – HIGHLIGHTS

#330649

Postby NeilW » August 3rd, 2020, 6:32 pm

The main issue with banks is that they are super leveraged. The can burn through their capital buffer in no time if the loan book goes bad *and* the issue is systemic which means that the collateral market implodes as well at the same time.

That's good on the upside, but burns on the downside.

A 10% loss on their loan book would mean the bank has to do equity raising to restore its CET1 ratio to the minimum of 4.5%.

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Re: HSBC 2020 INTERIM RESULTS – HIGHLIGHTS

#330654

Postby Dod101 » August 3rd, 2020, 7:14 pm

NeilW wrote:The main issue with banks is that they are super leveraged. The can burn through their capital buffer in no time if the loan book goes bad *and* the issue is systemic which means that the collateral market implodes as well at the same time.

That's good on the upside, but burns on the downside.

A 10% loss on their loan book would mean the bank has to do equity raising to restore its CET1 ratio to the minimum of 4.5%.


HSBC reported this morning that their CET1 ratio was 15% at 30 June after their current provisions so there is a fair bit of cushioning to say the least. Of course any highly geared business is good on the upside but burns on the downside. Most of us I think know that.

Even if the dividend is restored at a lower level I suspect that the share price will rise, but that we will need to wait a while to know about. Next year I should imagine at the time of their annual results statement.

Dod

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Re: HSBC 2020 INTERIM RESULTS – HIGHLIGHTS

#330659

Postby GoSeigen » August 3rd, 2020, 7:23 pm

NeilW wrote:The main issue with banks is that they are super leveraged. The can burn through their capital buffer in no time if the loan book goes bad *and* the issue is systemic which means that the collateral market implodes as well at the same time.

That's good on the upside, but burns on the downside.

A 10% loss on their loan book would mean the bank has to do equity raising to restore its CET1 ratio to the minimum of 4.5%.


What NeilW forgets is that banks can print money out of thin air whenever they like.


GS

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Re: HSBC 2020 INTERIM RESULTS – HIGHLIGHTS

#330898

Postby NeilW » August 4th, 2020, 4:58 pm

GoSeigen wrote:What NeilW forgets is that banks can print money out of thin air whenever they like.


GS


Well to those of us that understand the process, it ain't quite that simple. They still have to sell the equity to their depositors and launder the loans used to create the deposits through a couple of other banks first.

And of course you still need collateral to get a loan. Banks are still, at root, discounting houses.


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