SOURCE / COMPANIES
HSBC’s profits down 34% in 2020, experts write off prospects in China over Huawei friction
Published: Feb 23, 2021 08:13 PM

HSBC



London-based HSBC's profits slumped 34 percent on a yearly basis to $8.8 billion in 2020, which the lender attributed to factors such as the COVID-19 pandemic and the ensuing economic challenges. But experts said that HSBC's damaged reputation in China over the Huawei CFO's arrest also contributed to the business slide.

They also expressed concern over the bank's future business performance in the country, citing its damaged reputation and the chilly global economic situation, although HSBC plans to strengthen its focus on the Chinese mainland and Hong Kong markets amid a global business slowdown. 

On Tuesday, the bank said that its pre-tax profit fell to $8.8 billion in 2020, with the bulk of its profits made in Asia. 

In summarizing the business slowdown, the company pointed to a number of challenges it faced in 2020, such as the pandemic, which drove up its expected credit losses, and central banks' interest rate cuts, which caused relevant business sectors to shrink.

Experts said, however, that HSBC's alleged involvement in a Huawei executive's arrest must have hurt its business in the Chinese market, which would mean a blow to the company's profitability in general. 

HSBC has previously been accused of colluding with the US government to lay a trap for Huawei, which eventually led to the arrest of Huawei CFO Meng Wanzhou, also the elder daughter of Huawei founder Ren Zhengfei, in Canada. 

Although HSBC denied the accusation, the bank's alleged actions sparked criticism and controversy in China, particularly on social networks like Weibo. Huawei is also reportedly taking the bank to court in the UK to prevent Meng's extradition. 

Xi Junyang, a professor at the Shanghai University of Finance and Economics, told the Global Times that HSBC's alleged handling of information to the US that led to Meng's arrest would cause concerns among potential clients, both in China and overseas. 

"It gives people the impression that the bank can't properly safeguard the interests of its clients. This must have partly affected the bank's business in China last year," he said. 

HSBC, however, intends to put more emphasis on the Chinese market as other global markets are still under the shadow of the pandemic. Recently, the bank announced a major reshuffle of executives, with many executive roles expected to be relocated to the bank's historic home base of Hong Kong, according to reports. 

The bank also stressed in the 2020 financial statement that the economic recovery of China has been "impressive", and noted that it would accelerate investment in key areas of growth, including the "Asian franchise." 

Financial expert Zhao Qingming said it's a "wise choice" HSBC has made, as Asia's economic growth momentum far outpaces that of the EU or the US. 

However, he said that following the Huawei controversy, some Chinese companies, especially technology companies that are concerned about intellectual property rights services, would refrain from cooperating with HSBC. This would hinder HSBC's business expansion in China. 

But he said it's unlikely that the company will face administrative restrictions or prejudice in China. Besides, it still has room to develop in China considering the country's huge markets and the existence of many foreign institutions. 

HSBC said that it had a good start to 2021 and is "cautiously optimistic" about the remaining months of this year. The bank also stressed that the geopolitical situation will exert a lasting influence on its business, and it will monitor the global political environment closely in terms of its strategy. 

HSBC's shares rose 0.43 percent to HK$46.7 ($6.02) on Tuesday.


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