By Kristy Dorsey
Banking giant HSBC has paused plans for thousands of job cuts amid the current health crisis as the fall-out from Covid-19 cut profits by almost half in the first three months of this year.
The group’s first quarter earnings update highlighted the scale of the outbreak’s impact, with HSBC taking a £2.4 billion charge to cover potential defaults by customers unable to make payments. The loan loss provisions were nearly 40% higher than expected by analysts, and caused profits to fall by 48% to £2.6bn.
HSBC said it could be forced to set aside as much as £8.8bn to cover bad debts for the full year across the 64 countries in which it operates. That would be its biggest provision for debt losses since 2011, when the eurozone crisis led to more than £9.4bn of provisions.
READ MORE: Bank shares dive after regulator orders dividends to be scrapped
Group chief executive Noel Quinn said the pandemic’s impact on customers was the main driver of the downturn in performance by HSBC, which in February announced that it would slash about 15% of its workforce during the coming three years. The restructuring will lead to a 35,000 reduction in global headcount to approximately 200,000.
“I take the well-being of our people extremely seriously,” Mr Quinn said yesterday. “We have therefore paused the vast majority of redundancies related to the transformation we announced in February to reduce the uncertainty they are facing at this difficult time.”
HSBC joins a number of other big banks in Europe and the US who have been reassuring staff both privately and publicly that job cuts are not currently on the table. Many lenders are concerned about being left unprepared if too many staff are off sick from work, or if there is a sharp rebound in activity once markets normalise.
READ MORE: 35,000 jobs to go at HSBC as profit plummets by a third
Last week, Lloyds said it was suspending plans for 780 job cuts across its UK branch network amid surging demand for loans and uncertainty over how many of its employees may need to self-isolate.
HSBC’s ringfenced UK bank accounted for £473 million of global bad debt provisions in the first quarter, with two-thirds of that earmarked to cover the cost of bad consumer debts such as mortgages and credit cards. Some of that money had already been set aside for potential Brexit hardship.
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