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HSBC strengthens its exposure to Asia


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(AOF) – On the occasion of the publication of its annual results, HSBC presented a new strategy focused on Asia where it is already making most of its profits. Over the last three months of 2020, they have declined less than expected. However, adjusted profit was cut by 50% to $ 2.2 billion due to the 69% jump in provisions for bad debts, now representing $ 1.17 billion. The consensus compiled by the bank was more pessimistic, standing at 1.8 billion for adjusted profit.

Like its American and European competitors, the cost of risk, although high, was particularly pleasant.

The British bank was also faced with a fall of 14% to 11.824 billion dollars of its revenues, the increase in the activity of trades related to financial markets being more than offset by the fall in interest rates.

Recognizing that the latter will remain low for longer than expected, the bank has reduced its ambitions in terms of profitability in the medium term. HSBC no longer plans to meet its target for a return on tangible equity (RoTE) of between 10% and 12% in 2022 and is now aiming for a RoTE greater than or equal to 10% in the medium term. The yield fell to 3.1% in 2020.

The bank is also targeting a hard capital ratio of at least 14% and expects it to be between 14% and 14.5% in the medium term. It stood at 15.9% at the end of December 2020, up 1.2 points over one year.

It also expects to pay between 40% and 55% of its profits in the form of dividends from 2022. HSBC today announced the payment of a dividend of 15 cents per share, being limited by the Bank of England in its remuneration policy for its shareholders.

HSBC took advantage of this publication to announce the accentuation of its pivot to Asia where it plans to invest at least $ 3.5 billion in wealth management and $ 0.8 billion in its market activities. The bank will also invest $ 2 billion in wholesale banking.

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Cascading downsizing

In the United States and Europe, investment banks had put their workforce reduction plans on hold. However, faced with a surge in the cost of unpaid debts, these establishments will have to reduce their staff. Even if, in the year 2020, some analysts estimate that the revenues of the twelve major global investment banks should jump 25% to more than 188 billion dollars. S&P Global Ratings considers 2021 to be even tougher than 2009.

European banks are the most active in terms of workforce reduction. In the third quarter, front office staff fell by 5% in Europe. The equity trades were the most affected.

Commerzbank, which posted losses of 162 million euros between January and September following provisions to deal with the crisis and restructuring charges, could cut around 10,000 jobs. This is almost as much as its rival, Deutsche Bank, which will reduce its workforce from 87,000 to 74,000 jobs by 2022.

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