HSBC Holdings Plc
HSBC will have disappointed many with the profit decline. The bank is to announce a major strategy overhaul today. Image Credit: Bloomberg

Hong Kong/London (Reuters): HSBC Holdings posted a fall of 33 per cent in annual profit, lagging analyst estimates, mainly due to a goodwill impairment of $7.3 billion related to its investment banking and commercial banking businesses in Europe.

Europe’s biggest bank by assets, which makes the bulk of its revenue in Asia, reported profit before tax of $13.35 billion for 2019 versus $19.89 billion a year earlier. The result, which is being announced along with a strategy update by interim Chief Executive Noel Quinn, compared with the $20.03 billion average of brokerage estimates compiled by the bank.

HSBC is in over 50 countries across Europe, North America, the Middle East and Asia - with the latter accounting for roughly half of its revenue and 90 per cent of profit.

Taking a cost hit

HSBC Holdings is taking about $7.3 billion of charges and exiting several business units in its most ambitious restructuring plan since the global financial crisis of 2008, according to Bloomberg.

It is targeting cost cuts by $4.5 billion as it takes on a refreshed strategy to boost returns. The bank, which earns the bulk of its profits in Asia, is still searching for a permanent CEO while Quinn runs the lender.

"Parts of our business are not delivering acceptable returns," Quinn said in a statement as part of its full-year earnings. "We are therefore outlining a revised plan to increase returns for investors."

Key businesses targetted

Cutbacks will extend into parts of its European and U.S. investment banking businesses. In the US, assets linked to its trading operations will be nearly halved under the new plan. But the lender will bolster its investment banking units in Asia and the Middle East.

A refreshed strategy is a key plank to Chairman Mark Tucker's plans to transform HSBC as questions have mounted over its relatively poor returns given its exposure to many of the world's fastest-growing economies, in particular China where it has focused its investment.

The company also suspended its share buyback program for 2020 and 2021.

High-profile ouster
* Previous boss John Flint was ousted as CEO last year in part over Chairman Mark Tucker's concerns the executive lacked the ability to turnaround the performance.
* Interim chief Noel Quinn, Tucker and chief financial officer Ewen Stevenson then began developing plans aimed at shrinking the bank's cost base and focusing on higher returning markets, while curtailing exposures to regions and operations deemed subpar.