HSBC 2019 full-year earnings failed to meet the expectations. When it was revealed, HSBC shares price started to fall.
Europe’s largest bank HSBC suffered a devastating setback, as the firm fails to meet up with its 2019 expectations. The European financial organization reported a 33% fall in 2019 pre-tax profit to $13.35 billion. The devastating loss, which was caused by a number of factors, could hit the company hard, which is why the firm is taking drastic steps to minimize the loss, including cutting down 35,000 jobs.
The firm in a statement revealed that the $7.3 billion goodwill impairment in Europe arose from an update to long-term economic growth assumptions, which impacted a number of its businesses and from the planned reshaping of the bank’s global banking and market business.
Major Setback for HSBC
Amidst the on-going struggle, HSBC also warned that the company could be facing a very tough battle in China, which is one of its major strongholds in Asia, largely due to the effect of the coronavirus. The firm has talked about the pain it’s been going through since the outbreak, stating that the virus has created a significant disruption of staff, suppliers and customers, particularly in mainland China.
Furthermore, the company maintained that if the virus is not stopped quickly, it might lead to an economic slowdown and might also affect the interests of the company in all of China and even Hong Kong. In the long run, it might also lead to revenue reductions from lower lending transactions volumes, and further credit losses stemming from disruption to customer supply chains.
Way Forward and Falling HSBC Shares
HSBC shares have reacted rather negatively on such results. In the pre-market, the shares lost over 5% to $36.
But the company is ready to roll out its arsenal and carefully crawl out of this financial mess through a major plan that’s hinged on a massive restructuring strategy. The bank said it plans to suspend share buy-backs for 2020 and 2021 as it undertakes a ‘high level of restructuring’’ over the next two years.
The bank said it would reduce sales and trading, and equity research in Europe; transaction structured products capabilities from the UK to Asia. In the U.S., it plans to reduce the branch network by 30% and re-position as an international client-focused corporate bank, with a targeted retail offering.
On a global scale, the bank says it plans to shift more focus to the Middle East and the Asian market while still maintaining its strong presence at the heart of London.
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