Operating income rose modestly, but adverse impact of COVID-19 cut profits before income tax by 66%
Despite recent coronavirus-driven downturn in the financial markets and broader economy, HSBC Bank Canada has managed to keep its first-quarter operating income stable in comparison to the same period last year.
The bank has announced that for the quarter ended March 31, it managed to take in operating income of $546 million, a shade above the $545 million it reported in Q1 2019.
The firm said its performance this year was built on continued work to grow its businesses and deepen relationships with existing customers, notably in Commercial Banking and Retail and Wealth Management.
But that was negatively offset by a slew of coronavirus-driven events, including marked slowdowns in national supply chains, historic measures taken globally to mitigate the pandemic’s spread, declines in oil prices, and emergency rate cuts from the Bank of Canada.
The bank reported a change in expected credit losses resulting in a charge of $140m, which is based on forward-looking economic scenarios related to COVID-19, as well as impairments from non-performing loans in the energy sector.
Amid HSBC Canada’s efforts to manage costs while strategically making investments to grow its businesses, simplify processes, and introduce new digital services, total operating expenses inched downward by $1 million 0.3% for Q1 2020.
But due mainly to the variance in expected credit losses and lower operating income from the adverse impact of the virus, profit before income tax expense was recorded at $79 million, representing a 66% decrease for the quarter.
During Q1 2020, the bank declared a final dividend of $160 million on HSBC Bank Canada common shares in respect of the 2019 financial year, as well as regular quarterly dividends of $12 million for the first quarter of 2020 on all series of HSBC Bank Canada Class 1 preferred shares.
On April 24, the bank also declared regular quarterly dividends for the second quarter, to be paid on June 30 or the first business day thereafter for all series of HSBC Bank Canada Class 1 preferred shares.
The bank has strengthened its capital and liquidity position to help its customers weather the economic disruptions brought about by measures to curb COVID-19 infection rates.
“We've introduced credit relief and other support measures for our customers and are actively participating in government programs to support the economy,” said HSBC Bank Canada President and CEO Sandra Stuart.
Aside from keeping branches open and operating its digital channels at much heightened levels to accommodate its customers, the bank has donated $500,000 to Food Banks Canada, Breakfast Club of Canada and United Way.
“We will continue to play our part in the response and recovery, and together I am confident we will get through this,” Stuart said.
