HSBC Ends 2020 with Decline of 30% in Profit

HSBC Holdings plc (HSBC) has today published its annual results in 2020, revealing a sharp decline in profit.

In 2020, the bank's profit after tax was down 30% to $6.1bn and profit before tax down 34% to $8.8bn because of higher expected credit losses (ECL) and other credit impairment charges and lower revenue. This negative metric has been partly offset by a fall in operating expenses. Results in 2020 included a $1.3bn impairment of software intangibles, while results in 2019 comprised a $7.3bn impairment of goodwill. In terms of adjusted profit before tax, HSBC saw a 45% decline to $12.1bn in 2020.

Revenue of HSBC in 2020 dropped 10% to $50.4bn despite its higher revenue in Global Markets. This was primarily due to the progressive impact of lower interest rates across the bank's global businesses. Adjusted revenue of the bank in 2020 came in at $50.4bn, representing a 8% decline when compared to the figure in 2019.

Net interest margin (NIM) was 1.32% in 2020, down 26 basis points (bps) from 2019, due to the impact of lower global interest rates.

HSBC's ECL was up $6.1bn to $8.8bn during the year, mainly due to the impact of the Covid-19 outbreak and the forward economic outlook. Allowance for ECL on loans and advances to customers jumped from $8.7bn at 31 December 2019 to $14.5bn at 31 December 2020.

In the year, the bank's operating expenses reduced 19% to $34.4bn, mainly due to the non-recurrence of a $7.3bn impairment of goodwill. Additionally, its adjusted operating expenses saw a slight decline of 3% to $31.5bn. 

During 2020, deposits grew by $204bn on a reported basis and $173bn on a constant currency basis, with growth in all global businesses.

After considering the requirements set out in the UK Prudential Regulation Authority's (PRA) temporary approach to shareholder distributions for 2020, the Board of HSBC has announced an interim dividend for 2020 of $0.15 per ordinary share, to be paid in cash with no scrip alternative.