HSBC has reported a significant drop in profits in H1 2023, attributed to a combination of economic factors and changing market conditions.
HSBC's Financial Results
On July 30, HSBC, Europe's largest lender, announced a profit of $15.8 billion for the first half of 2023, which represents a 26% drop from expectations. The pre-tax profit year-on-year fell by 29% to $6.33 billion, primarily due to bad debts in China. HSBC's CEO, George Elhedery, noted that the disappointing results were attributed to 'structural challenges' causing uncertainty in the global economy.
Cost-Saving Targets
HSBC plans to achieve up to $300 million in cost savings by 2025 and $1.5 billion by the end of next year. In Q2, the bank incurred restructuring expenses of $475 million, in addition to an estimated $1.8 billion in severance and upfront costs expected by 2026. Elhedery indicated a forecast increase in credit losses, expected to rise by at least $900 million from last year due to the declining real estate sector in Hong Kong.
Bank's Operational Restructuring
HSBC has announced plans to split its operations into four separate divisions for Eastern and Western markets. This move aims to optimize costs and streamline business operations beyond its main regions of influence. Analysts note that these measures simplify cost-cutting efforts but represent a significant change in the bank's overall business model.
Amid economic instability, HSBC continues to adapt with planned cost reductions and operational restructuring aimed at maintaining shareholder confidence in future prospects.
