Business

HSBC to slash office footprint over the long term as profits drop 34 per cent

HSBC has five branches in Northern Ireland.

HSBC announced plans to cut its global office footprint by 40 per cent after suffering a 34 per cent drop in pre-tax profit to $8.8 billion (£6.2bn) for the year ending December 31.

The bank, which has five branches in Northern Ireland, said pre-tax profit was down from $3.3bn (£9.4bn) for the same period in 2019, though US financial services firm Jefferies noted that result was 23 per cent better than market expectations.

HSBC group chief executive Noel Quinn said the cut would come from axing office buildings as their leases end. He said it would not include branches.

“We are focused on those offices with support functions and head office activities when we talk about the 40 per cent reduction,” said the bank boss.

“We believe we’ll achieve it via a very different style of working post-Covid with a more hybrid model."

Meanwhile, HSBC's adjusted profit before tax of $12.1bn (£8.6bn) fell 76 per cent on the year before.

The bank reported an adjusted revenue of $50.4bn (£35.8bn), representing a fall of just 8 per cent on 2019's $54.9bn (£39bn), with shares shooting up 3.3 per cent in early trading in Hong Kong following Tuesday's announcement.

HSBC said its strategy for the future would include shifting capital to Asia, where it makes the majority of its earnings.

The bank is one of many businesses to be caught in the split between China on one hand and Europe and the US on the other.

In the UK, it had been criticised for endorsing a law that has allowed Chinese leaders to crack down on pro-democracy activists in Hong Kong.

Meanwhile the company cannot afford to lose business in China, which accounts for a large proportion of its profits.

"Right now the bank is walking a tightrope between being seen to uphold new controversial laws imposed by Beijing and not provoking a retail consumer backlash in Hong Kong which could cause significant damage financially and in terms of its reputation," said Hargreaves Lansdown analyst Susannah Streeter.

Noel Quinn said the company's mandate in 2020 was to "provide stability in a highly unstable environment for our customers, communities and colleagues".

He added: "I believe we achieved that in spite of the many challenges presented by the Covid-19 pandemic and heightened geopolitical uncertainty.

"Our people delivered an exceptional level of support for our customers in very tough circumstances, while our strong balance sheet and liquidity gave reassurance to those who rely on us.

"We achieved this while delivering a solid financial performance in the context of the pandemic - particularly in Asia - and laying firm foundations for our future growth."

Last month the bank announced it would close 82 branches across the UK after the pandemic led to a greater shift to online banking, though it did say the closures were not entirely related to the lockdowns and restrictions introduced.

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