The announced cuts in about 35,000 jobs at HSBC which was announced by the lender in February as a part of massive restructuring program undertaken by it to reduce costs, has been paused for the time being. Making the latest announcement, the bank has said that it does not want the staff to leave right now because they would probably find it difficult to find work elsewhere amid the novel coronavirus pandemic.
The exceptional circumstances created by the pandemic crisis have prompted the bank to put on hold the “the vast majority” of redundancies, the company’s chief Noel Quinn.
This announcement was made by bank even as it reported a 50 per cent drop in its profits because of the pandemic in the latest completed quarter. The pre-tax earnings of the bank during the quarter was at $3.2bn compared to $6.2bn in the same period a year ago.
The bank also forecast that it expected its bad loans to amount to $3bn due because customers will not be able to repay debts amidst the pandemic. Earnings are also likely to remain under pressure, the bank predicted.
“The economic impact of the Covid-19 pandemic on our customers has been the main driver of the change in our financial performance,” Quinn said.
Earlier in February, the bank had announced its plans of trimming down its workforce to about 200,000 over a period of the next three years from the current number of 235,000. That announcement was a part of a larger restructuring process as the company with the aimed to reduce expenditure at the bank by $4.5bn by 2022.
The plan to delay job cuts would provoke mixed feelings, said Simon French, chief economist at Panmure Gordon. “This is probably the best bit of news in the whole results for employees,” he said. “But while it’s good news for employees it isn’t necessarily good news for shareholders and a return to higher profitability,” he added.
The profits of HSBC have dramatically reduced by 50 per cent as the bank increased its provision for bad loans by five times to $3.2bn.
And yet there could be a sigh of relief for the bosses of HSBC, its shareholders and employees that the hit from the pandemic was not even greater which was possibility because of the exposure of the bank to some of the markets that have been worst affected by the pandemic. There was also relief over the decision to pause the culling of one in eight jobs at the bank.
However according to analysts, this sense of relief for HSBC could be short lived. The provision for bad loans could hit $11bn this year, the bank has warned, which would result in “materially lower profits”. The bank is also expecting a severe recession particularly in Europe and in the United States. And while the company can take relief of the opening up of the Chinese economy with factories starting to manufacture again following the coronavirus pandemic, the bank has admitted that it would suffer because of weaker demand in the western markets.
(Adapted from BBC.com)