HSBC, Europe’s largest bank by assets, posted a 36 per cent drop in its third quarter profit before tax beating analysts' estimates.
Profit before tax dropped to $3.1 billion for the quarter ending September 30, dragged down by lower revenue and provisions for loan losses amid the pandemic-driven economic slowdown, the bank said in a statement.
The quarterly earning was better than the $2.07bn average of analysts’ estimates. HSBC shares gained about 5 per cent in trading at 12:09pm UAE time on Tuesday following the results.
HSBC's third quarter reported profit after tax was down 46 per cent to $2bn, while its adjusted profit before tax dropped 21 per cent to $4.3bn. Quarterly earnings included the lender's share of an impairment of goodwill by its associate Saudi British Bank of $500 million, it said.
Reported revenue for the period slumped 11 per cent to $11.9bn, reflecting the impact of interest rate reductions across all global businesses. It was partly offset by a favourable movement in credit and funding valuation adjustments and higher revenue in global markets business.
Reported expected credit losses and credit impairment charges dropped to $785 million in the third quarter from $3.8bn reported in the previous three months.
“These were promising results against a backdrop of continuing impacts of Covid-19 on the global economy," Noel Quinn, HSBC's group chief executive, said on Tuesday.
"I'm pleased with the significantly lower credit losses in the quarter, and we are moving at pace to adapt our business model to a protracted low interest rate environment."
The bank expects losses from bad loans to be at the lower end of the $8bn to $13bn range, indicated earlier in the year.
"This latest guidance, which continues to be subject to a high degree of uncertainty due to Covid-19 and geopolitical tensions, assumes that the likelihood of further significant deterioration in the current economic outlook is low," HSBC said.
Lenders globally are facing challenging market conditions amid the pandemic, which has tipped the global economy into its deepest recession since the 1930s. Banks have been forced to make provisions for expected loan losses and interest rates globally are at historic lows squeezing profits.
The top lenders in the US and Europe Banks have provisioned $139bn as bad debt losses could exceed $880bn by 2022, according to ComprarAcciones.com data. To offset a drop in revenue and profit margins, banks have resorted to cutting costs and adjusting their business models.
HSBC, which earns the bulk of its revenue from Asian markets, said its operations in the region continued to perform resiliently, with reported profit before tax in the third quarter reaching $3.2bn, despite interest rate headwinds.
"We also intend to increase our rate of investment in Asia, particularly in wealth, the Greater Bay Area, South Asia, trade finance and sustainable finance," Mr Quinn, said.
"I'm pleased with the significantly lower credit losses in the quarter, and we are moving at pace to adapt our business model to a protracted low interest rate environment"
HSBC, which is scaling back operations in Europe and the US, said it plans to continue transformation of the bank.
"We are accelerating the transformation of the group, moving our focus from interest-rate sensitive business lines towards fee-generating businesses, and further reducing our operating costs," Mr Quinn added.
The bank expects to reduce the group-wide 2022 annual cost base beyond its original $31bn target by exceeding the $4.5bn gross cost savings target.
"We expect to incur more than $6bn in ‘cost to achieve’ expenditure to generate these saves," it said.
On Tuesday, HSBC indicated it may resume limited dividend payments this year. Based on the bank's results for this year and its forecasts for the next, the board will consider whether to pay a "conservative dividend for 2020".
"We recognise that dividends are important ... any such dividend would be dependent on the economic outlook in early 2021, and be subject to regulatory consultation," HSBC said. "A final determination is expected to be made and communicated in February 2021 with our 2020 full-year results."
A dividend payout "could entice yield-hungry investors back into the shares," said Jasper Lawler, head of research at London Capital Group.
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
INDIA SQUADS
India squad for third Test against Sri Lanka
Virat Kohli (capt), Murali Vijay, Lokesh Rahul, Shikhar Dhawan, Cheteshwar Pujara, Ajinkya Rahane, Rohit Sharma, Wriddhiman Saha, Ravichandran Ashwin, Ravindra Jadeja, Kuldeep Yadav, Mohammed Shami, Umesh Yadav, Ishant Sharma, Vijay Shankar
India squad for ODI series against Sri Lanka
Rohit Sharma (capt), Shikhar Dhawan, Ajinkya Rahane, Shreyas Iyer, Manish Pandey, Kedar Jadhav, Dinesh Karthik, Mahendra Singh Dhoni, Hardik Pandya, Axar Patel, Kuldeep Yadav, Yuzvendra Chahal, Jasprit Bumrah, Bhuvneshwar Kumar, Siddarth Kaul
HOW TO WATCH
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Wayne Rooney's career
Everton (2002-2004)
- Appearances: 48
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Manchester United (2004-2017)
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England (2003-)
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Avengers 3: Infinity War: an American superhero film released in 2018 and based on the Marvel Comics story.
Sholay: a 1975 Indian action-adventure film. It follows the adventures of two criminals hired by police to catch a vagabond. The film was panned on release but is now considered a classic.
Lucifer: is a 2019 Malayalam-language action film. It dives into the gritty world of Kerala’s politics and has become one of the highest-grossing Malayalam films of all time.
Can NRIs vote in the election?
Indians residing overseas cannot cast their ballot abroad
Non-resident Indians or NRIs can vote only by going to a polling booth in their home constituency
There are about 3.1 million NRIs living overseas
Indians have urged political parties to extend the right to vote to citizens residing overseas
A committee of the Election Commission of India approved of proxy voting for non-resident Indians
Proxy voting means that a person can authorise someone residing in the same polling booth area to cast a vote on his behalf.
This option is currently available for the armed forces, police and government officials posted outside India
A bill was passed in the lower house of India’s parliament or the Lok Sabha to extend proxy voting to non-resident Indians
However, this did not come before the upper house or Rajya Sabha and has lapsed
The issue of NRI voting draws a huge amount of interest in India and overseas
Over the past few months, Indians have received messages on mobile phones and on social media claiming that NRIs can cast their votes online
The Election Commission of India then clarified that NRIs could not vote online
The Election Commission lodged a complaint with the Delhi Police asking it to clamp down on the people spreading misinformation
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The Sheikh Zayed Future Energy Prize
This year’s winners of the US$4 million Sheikh Zayed Future Energy Prize will be recognised and rewarded in Abu Dhabi on January 15 as part of Abu Dhabi Sustainable Week, which runs in the capital from January 13 to 20.
From solutions to life-changing technologies, the aim is to discover innovative breakthroughs to create a new and sustainable energy future.
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Day 1
Toss: South Africa, field first
Pakistan (1st innings) 177: Sarfraz 56, Masood 44; Olivier 4-48
South Africa (1st innings) 123-2: Markram 78; Masood 1-4
Scoreline
Saudi Arabia 1-0 Japan
Saudi Arabia Al Muwallad 63’
Benefits of first-time home buyers' scheme
- Priority access to new homes from participating developers
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Ten tax points to be aware of in 2026
1. Domestic VAT refund amendments: request your refund within five years
If a business does not apply for the refund on time, they lose their credit.
2. E-invoicing in the UAE
Businesses should continue preparing for the implementation of e-invoicing in the UAE, with 2026 a preparation and transition period ahead of phased mandatory adoption.
3. More tax audits
Tax authorities are increasingly using data already available across multiple filings to identify audit risks.
4. More beneficial VAT and excise tax penalty regime
Tax disputes are expected to become more frequent and more structured, with clearer administrative objection and appeal processes. The UAE has adopted a new penalty regime for VAT and excise disputes, which now mirrors the penalty regime for corporate tax.
5. Greater emphasis on statutory audit
There is a greater need for the accuracy of financial statements. The International Financial Reporting Standards standards need to be strictly adhered to and, as a result, the quality of the audits will need to increase.
6. Further transfer pricing enforcement
Transfer pricing enforcement, which refers to the practice of establishing prices for internal transactions between related entities, is expected to broaden in scope. The UAE will shortly open the possibility to negotiate advance pricing agreements, or essentially rulings for transfer pricing purposes.
7. Limited time periods for audits
Recent amendments also introduce a default five-year limitation period for tax audits and assessments, subject to specific statutory exceptions. While the standard audit and assessment period is five years, this may be extended to up to 15 years in cases involving fraud or tax evasion.
8. Pillar 2 implementation
Many multinational groups will begin to feel the practical effect of the Domestic Minimum Top-Up Tax (DMTT), the UAE's implementation of the OECD’s global minimum tax under Pillar 2. While the rules apply for financial years starting on or after January 1, 2025, it is 2026 that marks the transition to an operational phase.
9. Reduced compliance obligations for imported goods and services
Businesses that apply the reverse-charge mechanism for VAT purposes in the UAE may benefit from reduced compliance obligations.
10. Substance and CbC reporting focus
Tax authorities are expected to continue strengthening the enforcement of economic substance and Country-by-Country (CbC) reporting frameworks. In the UAE, these regimes are increasingly being used as risk-assessment tools, providing tax authorities with a comprehensive view of multinational groups’ global footprints and enabling them to assess whether profits are aligned with real economic activity.
Contributed by Thomas Vanhee and Hend Rashwan, Aurifer
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UAE currency: the story behind the money in your pockets
ATP WORLD No 1
2004 Roger Federer
2005 Roger Federer
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Mohammed bin Zayed Majlis
Like a Fading Shadow
Antonio Muñoz Molina
Translated from the Spanish by Camilo A. Ramirez
Tuskar Rock Press (pp. 310)
