HSBC has reported a 29 per cent slump in pre-tax profits for the first half of 2016 amid concerns over the EU referendum and the economic outlook in China.
Britain’s biggest bank saw annual pre-tax profits tumble to $9.7 billion (£7.2bn), compared with $13.6bn in the same period in 2015. Pre-tax profit in the second quarter plummeted 45 per cent to $3.61bn.
Group chairman Douglas Flint said the results came amid a “turbulent period” for the bank.
He said: “Concern over the sustainable level of economic growth in China was the most significant feature of the first quarter and, as this moderated, uncertainty over the upcoming UK referendum on membership of the European Union intensified.”
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HSBC said revenue fell from $32.9bn in the first half of 2015 to $29.5bn in the first six months of this year. The results cover from the start of 2016 up to one week after the referendum on 23 June.
“The period ended with exceptional volatility as financial markets reacted to the UK referendum decision to leave the EU, a result that had not been anticipated,” Flint said.
The bank saw demand for credit investment fall as a consequence of uncertainty during the first half of the year, and a chill in equity market activity was exacerbated by factors including a crash in the price of oil, he added.
The vote to leave the EU means the UK and UK business are entering a “new era”, Flint said as he warned that negotiating Brexit and new global trade deals will be complex and time-consuming.
He called for calm and careful consideration as to how prosperity, growth and a “dynamic economy” for the EU and UK can be ensured after an “orderly transition period”.
“Critical elements include securing the best possible outcome on continuing terms of trade and market access, and ensuring the UK remains attractive for inward investment and has access to all the skills necessary to be fully competitive,” said Flint.
HSBC relies on open trading relationships, from individuals to nations, he explained.
“We believe that such an open trading relationship must be at the centre of the new relationship between the UK and the EU, and indeed the rest of the world.
“We aim to do our part in making the transition for our customers to the new arrangements as smooth as possible.”
Depending on the outcome of the Brexit negotiations, particularly the UK’s “passporting” arrangements – authorisation to trade with the EU – the bank will have to reposition its European business, Flint said.
He added that, despite those efforts, there were other threats from “political and geopolitical events”.
HSBC also announced a $2.5bn shares buyback and said shareholders would receive half of the proceeds of the sale of its Brazil unit.