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In February HSBC will announce the details of a major restructuring, and this is likely to result in material expenses in subsequent quarters. The new plan comes as Hong Kong suffered the first decline in GDP growth since the financial crisis and the economic outlook for Asia has weakened. The economic environment is likely to add to pressure on profitability and represents a challenge to the goal of redeploying more capital into faster growth and higher return markets.
Key highlights of the commentary include:
• In February 2020 HSBC will unveil a new plan, focused on reducing costs and improving capital returns.
• HSBC expects the turnaround to result in substantial upfront restructuring costs in subsequent quarters.
• The operating environment for the Group’s Asian franchise, in particular the Hong Kong business, has been deteriorating.
• The economic slowdown in Asia could add pressure on profitability and represents a risk to the goal of redeploying more capital into dynamic and profitable businesses.
“Given the high importance of the region to the Group, the deterioration in Hong Kong’s economy is likely to add further pressure on profitability, that will also be affected by the restructuring. In our opinion, the slowdown in Asia also represents a risk to the Group’s plan to redeploy more capital into dynamic and profitable businesses.” said Tomasz Walkowicz, Vice President – Global Financial Institutions Group, DBRS Morningstar.