HSBC profits fall nearly 30% amid Ukraine war and default fears

theguardian.com:

Profits at HSBC tumbled nearly 30% in the first quarter due to fears of a surge in defaults linked to inflation and the “devastating consequences” of the war in Ukraine.

The London-headquartered bank said profits fell to $4.2bn (£3.3bn) from $5.8bn a year ago, as it put aside $642m to cover potential defaults on loans in the first three months of the year.

Banks have started to put aside more money to cover losses from unpaid loans, amid fears that customers will fall behind on payments due to the cost of living crisis that has been exacerbated by the Russian invasion of Ukraine, which has disrupted energy flows and global supply chains.

It marks a reversal from 2021, when banks were able to release money put aside for defaults linked to the Covid crisis, thanks to government support programmes that kept workers and companies afloat.

“The Russia-Ukraine war continues to have devastating consequences both within Ukraine and beyond”, the HSBC chief executive, Noel Quinn said, with the bank adding that it was “monitoring developments closely”.

However, the lender has so far kept its operations open in Russia, despite pressure from MPs and the decision by rivals including JP Morgan and Goldman Sachs to close their offices last month.

HSBC, which has about 200 staff in the country, defended its position, saying it was not accepting new business or customers there. “The vast majority of our business in Russia serves multinational corporate clients headquartered in other countries, and as a global bank, HSBC has a responsibility to help them manage these challenging circumstances,” the bank said.

Profits in the first quarter were also affected by lower revenues from its wealth business caused by the strict Covid lockdown policy in