3Q 2020 update

The 3Q 2020 Earnings Release, investor presentation and data pack are available to download.

Downloads and webcast

At a glance

For the three months to 30 September 2020

Fact: our reported profit before tax was USD3.1 billion in 3Q20, compared USD4.8 billion with in 3Q19.
Fact: our adjusted profit before tax was USD4.3 billion in 3Q20, compared with USD5.4 billion in 3Q19.
Fact: our adjusted revenue was USD12.1 billion in 3Q20, compared with USD13.3 billion in 3Q19.
Fact: our adjusted costs were USD7.4 billion in 3Q20, compared with USD7.6 billion in 3Q19.
Fact: our reported expected credit losses and other credit impairment charges were USD0.8 billion in 3Q20, compared with USD0.9 billion in 3Q19.
Fact: our common equity tier 1 ratio was 15.6 per cent at 30 September 2020, compared with 15.0 per cent at 30 June 2020.

Highlights

  • Reported profit before tax in 3Q20 was $3.1bn, down $1.8bn on 3Q19; adjusted profit before tax was $4.3bn, down $1.1bn
  • Adjusted profit before tax in 9M20 was a resilient $9.9bn
  • Our 3Q20 profit before tax was supported by significantly reduced expected credit losses and other credit impairment charges, and continued good cost management
  • We continued to support customers, communities and colleagues through COVID-19 restrictions
  • We have strong funding, liquidity and capital; adjusted deposits of $1.6tn were up $164bn or 12% on 3Q19. Our common equity tier 1 ratio was 15.6%
  • Our transformation and restructuring are on track despite headwinds. We expect to exceed our original FY22 targets of $100bn of gross RWA reductions and $4.5bn cost programme saves

Group Chief Executive commentary

Image of Noel Quinn

“These were promising results against a backdrop of the continuing impacts of COVID-19 on the global economy. I’m pleased with the significantly lower credit losses in the quarter, and we are moving at pace to adapt our business model to a protracted low interest rate environment.”

“We are accelerating the transformation of the Group, moving our focus from interest-rate sensitive business lines towards fee-generating businesses, and further reducing our operating costs. We also intend to increase our rate of investment in Asia, particularly in wealth, the Greater Bay Area, south Asia, trade finance and sustainable finance.”

Noel Quinn, HSBC Group Chief Executive
27 October 2020

Accelerating our transformation

On 18 February 2020, the Group announced a substantial transformation programme designed to ensure HSBC is fit for the future, with plans to reshape underperforming businesses, simplify the organisation and reduce costs.

Our progress so far (2020 year to date)

$41bn
US DOLLARS
Fact: we have reduced risk-weighted assets in low-returning areas by USD41 billion.
$0.6bn
US DOLLARS
Fact: we have achieved USD0.6 billion of cost programme saves.
$97bn
US DOLLARS
Fact: we have helped clients raise USD97 billion in social and COVID-19 response bonds.

During the third quarter, we continued to make progress with our transformation programme:

  • We further reduced RWAs in our Global Banking & Markets business
  • We continued to increase investments in technology to improve the customer experience and efficiency, including a new digital multi-currency wallet, launched in Singapore for our Global Liquidity and Cash Management customers
  • We also launched VisionGo in Hong Kong, a digital community platform for small businesses and entrepreneurs, which has already attracted over 8,000 members

At the same time, our ongoing support for customers throughout the COVID-19 pandemic – including helping raise $97bn in social and COVID-19 relief bonds – secured a ‘Global Excellence in Leadership’ award from Euromoney magazine.

However, given the significant changes in the operating environment, we intend to accelerate the transformation of the Group.

We expect to reduce the Group’s 2022 annual cost base beyond our original $31bn target, while sustaining investment in our focus areas. We also expect to exceed our target to reduce RWAs by $100bn in low-returning areas by the end of 2022.

This is expected to allow more resources to be allocated to areas of competitive advantage, higher returns and growth. We are finalising our work on costs, capital and RWA deployment and intend to provide a more detailed and updated transformation plan with our full-year results in February 2021.

We also expect to provide an update on plans in France and the US at or before our full-year results in February 2021.

Transformation in action

Wealth planning goes mobile

HSBC customers in mainland China can now get financial advice in a location of their choice.
Read more

Our net zero ambition: a letter to customers

Noel Quinn has written an open letter to our customers explaining how we plan to support them on the journey to a net zero carbon future.
Read more

How blockchain could revolutionise bonds

HSBC has played a key role in a technology pilot that could transform the way bonds are issued.
Read more

Strategic priorities

We are driving our strategy forward in three key areas:

Accelerating in Asia

  • Asian economy is rebounding strongly, led by a pick-up in manufacturing and trade
  • HSBC’s client activity has shown resilience into the third quarter
  • We are stepping up investment in Asia to match our elevating ambitions

Digitising at pace

  • We continue to build out and invest in technology
  • We are investing in digital platforms that streamline operations and support growth in key areas such as Wealth, Transaction Banking, and SMEs

Restructuring further and faster

  • HSBC has delivered $41bn of RWA saves and $0.6bn of cost programme saves in 2020
  • Group headcount, including contractors, decreased by 10,000 vs. 3Q19
  • US and Europe are restructuring at pace and remain committed to 2022 targets

Outlook and dividends

Geopolitical risk, particularly relating to trade and other tensions between the US and China, remains heightened. There also remains uncertainty regarding the UK’s withdrawal from the European Union (‘EU’). Trade talks between the UK and the EU are ongoing and there remains a possibility that there may not be a trade deal agreed by the end of 2020.

We expect lower global interest rates to continue to put pressure on net interest income. Based on current interest rates, we expect further modest net interest income headwinds in 4Q20, with some stabilisation as we move into 2021.

Our ECL charge for 2020 is currently trending towards the lower end of the $8bn to $13bn range. This latest guidance, which continues to be subject to a high degree of uncertainty due to COVID-19 and geopolitical tensions, assumes that the likelihood of further significant deterioration in the current economic outlook is low, and that stage 3 impairments from now until the end of 2020 are broadly in line with the average quarterly charge for the year to date.

Dividends

We recognise that dividends are important. Based on our results for 2020 and our forecasts for 2021, the Board will consider whether to pay a conservative dividend for 2020. Any such dividend would be dependent on the economic outlook in early 2021, and be subject to regulatory consultation. A final determination is expected to be made and communicated in February 2021 with our 2020 full-year results. We also expect to communicate our revised policy for dividends for 2021 and beyond at the same time.

Downloads

Find out more on our Investors section or view details of the investor webcast replay

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