HSBC’s profits fall as China’s losses increase

Serena Lee and Lawrence White

HONG KONG/LONDON (Reuters) – HSBC Holdings reported a sharper profit decline than expected on Wednesday.

A 26% slump in pre-tax profits in the first half marked a challenge for CEO George El Headerry as Europe’s biggest banks increasingly lock in their growth plans after they captured losses in China and shrunk in the Western market.

Elhedaly, who unleashed a restructuring that was wiped out by banks after he was in charge last year, said in a revenue conference call that the bank will begin reviewing retail banking operations in Australia, Indonesia and Sri Lanka and will begin engaging Bangladeshi retailers later this year.

The banking operations of lenders’ businesses and institutions were not affected by these developments, he said.

The bank recorded profits of $15.8 billion in the first six months of the year, losing an estimated $16.5 billion from its broker.

HSBC’s London-listed stock fell 4.5%, comparable to previous losses in Hong Kong stock.

Lenders’ shares rose 36% last year as they benefited from higher returns on loans and increased revenues in their asset business, but they owed a 76% increase over the same period under their rival standard charter.

HSBC suffered an additional $2.1 billion hit from its national bank’s Communications Bank’s interests, with an impairment of $3 billion in February 2024, resulting in an impairment of $3 billion amid rising bad debts in China.

CEO Elhedery downplayed the bank’s Bocom stock obstacles and said it would not affect its ability to pay dividends.

“These are accounting-related obstacles… They don’t affect the outlook we have for the Chinese economy. They’re paper losses,” he said in the call.

The new prizes include a loss of $1.1 billion as a result of funding by Chinese banks earlier this year, diluting HSBC ownership.

Once the world’s second-largest economy’s key growth driver, China’s real estate market has been in a multi-year tailspin despite repeated government attempts to revive consumer demand.

HSBC’s expected credit losses rose to $1.9 billion, up $900 million compared to the first half of last year, saying the banks are partly responding to exposure to the troubled commercial real estate sector.

According to analysts at Citigroup, Hong Kong’s slow real estate market could continue to weigh the asset quality of banks operating in Hong Kong.